UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05742
Name of Fund: BlackRock Funds
BlackRock Tactical Opportunities Fund
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds, 55 East 52nd
Street, New York, NY 10055
Registrant’s telephone number, including area code: (800) 441-7762
Date of fiscal year end: 04/30/2020
Date of reporting period: 04/30/2020
Item 1 – Report to Stockholders
|
APRIL 30, 2020 |
| 2020 Annual Report | ||
BlackRock FundsSM
| · | BlackRock Tactical Opportunities Fund |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call (800) 441-7762 to inform BlackRock that you wish to continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC, BlackRock Fund Advisors or their affiliates, or all funds held with your financial intermediary, as applicable.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by: (i) accessing the BlackRock website at blackrock.com/edelivery and logging into your accounts, if you hold accounts directly with BlackRock, or (ii) contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.
| Not FDIC Insured • May Lose Value • No Bank Guarantee |
| 2 | THIS PAGE IS NOT PART OF YOUR FUND REPORT |
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| Fund Summary as of April 30, 2020 | BlackRock Tactical Opportunities Fund |
Investment Objective
BlackRock Tactical Opportunities Fund’s (the “Fund”) investment objective is to seek total return.
On November 13, 2019, the Board of Trustees of the Trust (the “Board”) approved a change in the fiscal year-end of the Fund, effective as of April 30, 2020, from September 30 to April 30.
Portfolio Management Commentary
How did the Fund perform?
For the abbreviated annual reporting period from October 1, 2019 to April 30, 2020, the Fund’s Institutional, Service, Investor A, Investor C and Class K Shares returned 2.79%, 2.63%, 2.70%, 2.21% and 2.93% respectively, outperforming its reference benchmark (75% Bloomberg Barclays U.S. 1-3 Year Treasury Bond lndex/25% MSCI All Country World Income Index (“ACWI”)), which returned 1.64%. For the same period, the Fund’s share classes also outperformed its cash benchmark, the ICE BofAML 3-Month U.S. Treasury Bill Index, which returned 1.05%.
What factors influenced performance?
Relative-value positioning in developed market bonds was a key positive contributor, as differences in yield curve dynamics led the Fund to hold longs in Australia, the United States and Canada against Europe. This strategy helped returns as yields generally fell further in those regions than they did in Europe. This was particularly true in the first quarter of 2020, when yields in Australia fell sharply while European yields remained relatively unchanged.
In the emerging markets, long positions in Latin America versus China and Poland boosted Fund performance early in the period as Latin American central banks were more aggressive in easing their monetary policies. Later in the period, long positions in South Africa and Mexico contributed positively as both nations’ central banks significantly cut interest rates in March and April 2020. The Fund retained these positions at the end of April, as the investment adviser felt the scale of the coronavirus pandemic and resulting potential for additional easing remained underpriced in the two countries.
Currency positioning was a key detractor. A long position in the Mexican peso suffered from dislocations in the emerging markets following the February-March 2020 downturn in commodity prices. A series of equity sector and industry views also detracted as the portfolio had less exposure to growth and momentum factors at a time in which both outperformed.
The Fund experienced losses from its directional short position in bonds. As bond prices became increasingly rich in early 2020 given the encouraging economic data, the investment adviser increased the extent of the short position. This shift proved to be a detractor, as global sovereign bond yields in fact fell to record lows due to the coronavirus pandemic. The investment adviser shifted the short position to a long in mid-March and recovered some, but not all, of the prior losses.
During the period, the investment adviser used derivatives as an efficient means to take active views on interest rates, equity indices and currencies. The use of derivatives instead of physical instruments had a positive impact on Fund performance. The Fund held a slightly elevated allocation to cash as collateral for derivative positions and as a means of earning a modest yield. The cash position did not have a material effect on performance.
Describe recent portfolio activity.
The Fund entered the period net long in global equities, net long in the U.S. dollar, and roughly flat in terms of duration (interest-rate sensitivity). The Fund moved its equity portfolio in favor of a more pro-growth stance in late 2019, and it maintained its net long position in equities. The Fund’s net bond exposure gradually shifted from flat to short in this time, and the Fund also moved to a net short position in the U.S. dollar, primarily versus the euro.
By late January 2020, macroeconomic data suggested an upswing in global manufacturing activity. The Fund therefore increased its allocation to cyclical assets by adding to stocks and selling bonds. As the impact of the coronavirus became more pronounced and global monetary and fiscal authorities unleashed massive support packages, the Fund adjusted its directional positioning and ended the period net long in both equities and bonds.
Describe portfolio positioning at period end.
The Fund held a series of relative-value positions in its equity portfolio, including long positions in France and the Netherlands versus Italy and Germany. In the bond portfolio, the Fund maintained a preference for Australia versus Europe. In currencies, the Fund was long in the euro against the U.S. dollar, and long in the Mexican peso and South African rand against other emerging markets and the United States.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| 4 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of April 30 2020 (continued) | BlackRock Tactical Opportunities Fund |
TOTAL RETURN BASED ON A $10,000 INVESTMENT
| (a) | Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge. |
| (b) | The Fund uses an asset allocation strategy, investing varying percentages of its portfolio in three major categories: stocks, bonds and money market instruments. The Fund’s total returns from May 15, 2012 through January 28, 2016 are the returns of the Fund when it followed a different investment strategy by investing a significant portion of its assets in other investment companies and directly in securities under the name BlackRock Managed Volatility Portfolio. The Fund’s total returns prior to May 15, 2012 are the returns of the Fund when it followed different investment strategies under the name BlackRock Asset Allocation Portfolio. |
| (c) | An unmanaged index that tracks 3-month U.S. Treasury securities. Effective January 1, 2020, the Fund’s benchmark was renamed from ICE BofAML 3-Month U.S. Treasury Bill Index to ICE BofA3-Month U.S. Treasury Bill index. |
| (d) | A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI ACWI consists of 49 country indexes comprising of 23 developed and 26 emerging market country indexes. |
| (e) | Asub-index of the Bloomberg Barclays U.S. Treasury Index, which measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury and includes a maturity constraint of at least one year and up to, but not including, three years until final maturity. |
| (f) | A customized weighted index comprised of75% Bloomberg Barclays U.S. 1-3 Year Treasury Bond Index and 25% MSCI ACWI. |
| FUND SUMMARY | 5 |
| Fund Summary as of April 30, 2020 (continued) | BlackRock Tactical Opportunities Fund |
Performance Summary for the Period Ended April 30, 2020
| Average Annual Total Returns (a)(b) | ||||||||||||||||||||||||||||||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||||||||||||||||||||||||||||||
| 6-Month Total Returns |
w/o sales charge |
w/sales charge |
w/o sales charge |
w/sales charge |
w/o sales charge |
w/sales charge |
||||||||||||||||||||||||||||||||||
| Institutional |
0.80 | % | 1.46 | % | N/A | 2.23 | % | N/A | 4.53 | % | N/A | |||||||||||||||||||||||||||||
| Service |
0.70 | 1.21 | N/A | 1.95 | N/A | 4.23 | N/A | |||||||||||||||||||||||||||||||||
| Investor A |
0.77 | 1.28 | (4.04 | )% | 1.93 | 0.84 | % | 4.22 | 3.66 | % | ||||||||||||||||||||||||||||||
| Investor C |
0.31 | 0.46 | (0.53 | ) | 1.22 | 1.22 | 3.49 | 3.49 | ||||||||||||||||||||||||||||||||
| Class K |
0.93 | 1.66 | N/A | 2.22 | N/A | 4.37 | N/A | |||||||||||||||||||||||||||||||||
| Bloomberg Barclays U.S. 1-3 Year Treasury Bond Index |
3.08 | 5.34 | N/A | 1.85 | N/A | 1.42 | N/A | |||||||||||||||||||||||||||||||||
| ICE BofAML 3-Month U.S. Treasury Bill Index |
0.85 | 2.07 | N/A | 1.19 | N/A | 0.64 | N/A | |||||||||||||||||||||||||||||||||
| 75% Bloomberg Barclays U.S. 1-3 Year Treasury Bond Index/25% MSCI ACWI |
0.70 | 3.19 | N/A | 2.69 | N/A | 2.99 | N/A | |||||||||||||||||||||||||||||||||
| MSCI ACWI |
(7.68 | ) | (4.96 | ) | N/A | 4.37 | N/A | 6.94 | N/A | |||||||||||||||||||||||||||||||
| (a) | Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 7 for a detailed description of share classes, including any related sales charges and fees, and how performance was calculated for certain share classes. |
| (b) | The Fund uses an asset allocation strategy, investing varying percentages of its portfolio in three major categories: stocks, bonds and money market instruments. The Fund’s total returns from May 15, 2012 through January 28, 2016 are the returns of the Fund when it followed a different investment strategy by investing a significant portion of its assets in other investment companies and directly in securities under the name BlackRock Managed Volatility Portfolio. The Fund’s total returns prior to May 15, 2012 are the returns of the Fund when it followed different investment strategies under the name BlackRock Asset Allocation Portfolio. |
N/A — Not applicable as share class and index do not have a sales charge.
Past performance is not indicative of future results.
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Portfolio Information
| 6 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Class K Shares performance shown prior to the Class K Shares inception date of August 1, 2016 is that of Investor A Shares, excluding any front-end sales charges, which are not applicable to Class K Shares. The performance of the Fund’s Class K Shares would be substantially similar to Investor A Shares because Class K Shares and Investor A Shares invest in the same portfolio of securities and performance would only differ to the extent that Class K Shares and Investor A Shares have different expenses. The actual returns of Class K Shares would have been higher than those of the Investor A Shares because Class K Shares have lower expenses than the Investor A Shares.
Service Shares are not subject to any sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee) and are only available to certain eligible investors.
Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.
Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries. These shares automatically convert to Investor A Shares after approximately ten years.
Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to blackrock.com to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in the performance tables on the previous page assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date or payable date, as applicable. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.
BlackRock Advisors, LLC (the “Manager”), the Fund’s investment adviser, has contractually agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. With respect to the Fund’s contractual waivers, the Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 6 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.
Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown below (which is based on a hypothetical investment of $1,000 invested on November 1, 2019 and held through April 30, 2020) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.
The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”
The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.
| Actual | Hypothetical (a) | |||||||||||||||||||||||||||||||
| Beginning (11/01/19) |
Ending Account Value |
Expenses Paid During the Period (b) |
Beginning (11/01/19) |
Ending Account Value |
Expenses Paid During the Period (b) |
Annualized Expense Ratio |
||||||||||||||||||||||||||
| Institutional |
$ | 1,000.00 | $ | 1,008.00 | $ | 4.34 | $ | 1,000.00 | $ | 1,020.54 | $ | 4.37 | 0.87 | % | ||||||||||||||||||
| Service |
1,000.00 | 1,007.00 | 5.79 | 1,000.00 | 1,019.10 | 5.82 | 1.16 | |||||||||||||||||||||||||
| Investor A |
1,000.00 | 1,007.70 | 5.79 | 1,000.00 | 1,019.10 | 5.82 | 1.16 | |||||||||||||||||||||||||
| Investor C |
1,000.00 | 1,003.10 | 9.31 | 1,000.00 | 1,015.56 | 9.37 | 1.87 | |||||||||||||||||||||||||
| Class K |
1,000.00 | 1,009.30 | 3.70 | 1,000.00 | 1,021.18 | 3.72 | 0.74 | |||||||||||||||||||||||||
| (a) | Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent six months divided by 366. |
| (b) | For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the six month period shown). |
| ABOUT FUND PERFORMANCE / DISCLOSURE OF EXPENSES | 7 |
| Derivative Financial Instruments |
The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.
| 8 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
|
April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| SCHEDULE OF INVESTMENTS | 9 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| 10 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| SCHEDULE OF INVESTMENTS | 11 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| 12 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| SCHEDULE OF INVESTMENTS | 13 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| 14 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| SCHEDULE OF INVESTMENTS | 15 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| 16 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| SCHEDULE OF INVESTMENTS | 17 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund (Percentages shown are based on Net Assets) |
| 18 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
| (a) | Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of period end. |
| (b) | Security is valued using significant unobservable inputs and is classified as Level 3 in the fair value hierarchy. |
| (c) | Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors. |
| (d) | Non-income producing security. |
| (e) | Restricted security as to resale, excluding 144A securities. The Fund held restricted securities with a current value of $4,704, representing less than 0.05% of its net assets as of period end, and an original cost of $48,000. |
| (f) | A security contractually bound to one or more other securities to form a single saleable unit which cannot be sold separately. |
| (g) | Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities. |
| (h) | Issuer filed for bankruptcy and/or is in default. |
| (i) | All or a portion of the security has been pledged in connection with outstanding centrally cleared swaps. |
| (j) | Annualized 7-day yield as of period end. |
| * | Investments in issuers considered to be an affiliate/affiliates of the Fund during the period ended April 30, 2020 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| Affiliated Issuer | Shares Held at 09/30/19 |
Shares Purchased |
Shares Sold |
Shares Held at 04/30/20 |
Value at 04/30/20 |
Income | Net Realized Gain (Loss)(a) |
Change in Unrealized Appreciation (Depreciation) |
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| BlackRock Liquidity Funds, T-Fund, Institutional Class(b) |
38,900,492 | 6,799,347 | — | 45,699,839 | $ | 45,699,839 | $ | 312,986 | $ | 70 | $ | — | ||||||||||||||||||||
| SL Liquidity Series, LLC, Money Market Series(b)(c) |
1,251,400 | — | (1,251,400 | ) | — | — | 1,364 | (d) | (46 | ) | — | |||||||||||||||||||||
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| $ | 45,699,839 | $ | 314,350 | $ | 24 | $ | — | |||||||||||||||||||||||||
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| (a) | Includes net capital gain distributions, if applicable. |
| (b) | Represents net shares purchased (sold). |
| (c) | As of period end, the entity is no longer held by the Fund. |
| (d) | Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities. |
For Fund compliance purposes, the Fund’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
| SCHEDULE OF INVESTMENTS | 19 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized |
||||||||||||
| Long Contracts |
||||||||||||||||
| AEX Index |
779 | 05/15/20 | $87,330 | $ | 2,448,364 | |||||||||||
| CAC 40 10 Euro Index |
1,313 | 05/15/20 | 65,403 | 1,694,744 | ||||||||||||
| Hang Seng China Enterprises Index |
597 | 05/28/20 | 38,434 | 1,394,967 | ||||||||||||
| MSCI Singapore Index |
247 | 05/28/20 | 5,223 | 154,541 | ||||||||||||
| Australia 10 Year Bond |
4,356 | 06/15/20 | 422,520 | 4,969,075 | ||||||||||||
| SPI 200 Index |
924 | 06/18/20 | 83,394 | 6,338,865 | ||||||||||||
| Canada 10 Year Bond |
2,061 | 06/19/20 | 221,195 | 1,463,403 | ||||||||||||
| FTSE 100 Index |
529 | 06/19/20 | 39,210 | 1,393,305 | ||||||||||||
| MSCI EAFE E-Mini Index |
222 | 06/19/20 | 18,185 | 2,018,393 | ||||||||||||
| MSCI Emerging Markets E-Mini Index |
387 | 06/19/20 | 17,529 | 1,577,105 | ||||||||||||
| S&P 500 E-Mini Index |
83 | 06/19/20 | 12,045 | 908,940 | ||||||||||||
| U.S. Treasury 10 Year Note |
1,480 | 06/19/20 | 205,813 | (140,930) | ||||||||||||
| U.S. Treasury Ultra Bond |
136 | 06/19/20 | 30,570 | 649,592 | ||||||||||||
| Long Gilt |
276 | 06/26/20 | 47,868 | 404,144 | ||||||||||||
|
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| 25,274,508 | ||||||||||||||||
|
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| Short Contracts |
||||||||||||||||
| OMXS30 Index |
3,079 | 05/15/20 | 49,803 | (2,044,740) | ||||||||||||
| Hang Seng Index |
254 | 05/28/20 | 40,139 | (1,307,386) | ||||||||||||
| Euro-Bund |
2,156 | 06/08/20 | 412,117 | (4,793,625) | ||||||||||||
| Euro-Buxl |
126 | 06/08/20 | 30,267 | (344,270) | ||||||||||||
| TOPIX Index |
315 | 06/11/20 | 42,679 | (1,658,762) | ||||||||||||
| DAX Index |
10 | 06/19/20 | 2,973 | (33,291) | ||||||||||||
| FTSE/MIB Index |
666 | 06/19/20 | 64,083 | (9,184,745) | ||||||||||||
| MSCI EAFE E-Mini Index |
1,646 | 06/19/20 | 134,832 | (15,070,545) | ||||||||||||
| S&P 500 E-Mini Index |
2,811 | 06/19/20 | 407,932 | (37,116,776) | ||||||||||||
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| (71,554,140) | ||||||||||||||||
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| $ | (46,279,632) | |||||||||||||||
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Forward Foreign Currency Exchange Contracts
| Currency Purchased |
Currency |
Counterparty | Settlement Date |
Unrealized Appreciation (Depreciation) |
||||||||||||||||
| AUD | 7,422,720 | USD | 4,453,855 | JPMorgan Chase Bank NA | 06/17/20 | $ | 383,818 | |||||||||||||
| CAD | 24,111,500 | USD | 16,762,140 | Citibank NA | 06/17/20 | 561,456 | ||||||||||||||
| CAD | 30,933,519 | USD | 21,893,835 | UBS AG | 06/17/20 | 331,235 | ||||||||||||||
| CHF | 4,093,000 | USD | 4,170,526 | Citibank NA | 06/17/20 | 75,238 | ||||||||||||||
| EUR | 544,000 | USD | 593,588 | Bank of New York | 06/17/20 | 3,096 | ||||||||||||||
| EUR | 3,908,000 | USD | 4,209,181 | JPMorgan Chase Bank NA | 06/17/20 | 77,291 | ||||||||||||||
| EUR | 3,875,000 | USD | 4,207,359 | Standard Chartered Bank | 06/17/20 | 42,917 | ||||||||||||||
| EUR | 2,096,022 | USD | 2,271,205 | UBS AG | 06/17/20 | 27,807 | ||||||||||||||
| GBP | 1,802,000 | USD | 2,240,703 | JPMorgan Chase Bank NA | 06/17/20 | 29,346 | ||||||||||||||
| JPY | 117,925,000 | USD | 1,095,565 | Bank of New York | 06/17/20 | 4,034 | ||||||||||||||
| JPY | 78,978,000 | USD | 716,385 | Citibank NA | 06/17/20 | 20,051 | ||||||||||||||
| JPY | 213,209,000 | USD | 1,924,788 | Goldman Sachs International | 06/17/20 | 63,292 | ||||||||||||||
| JPY | 472,103,000 | USD | 4,349,154 | JPMorgan Chase Bank NA | 06/17/20 | 52,999 | ||||||||||||||
| JPY | 2,334,933,304 | USD | 21,226,916 | Morgan Stanley & Co. International plc | 06/17/20 | 545,315 | ||||||||||||||
| KRW | 31,107,351,437 | USD | 25,324,390 | Bank of America NA | 06/17/20 | 300,011 | ||||||||||||||
| KRW | 7,296,788,563 | USD | 5,938,412 | BNP Paribas SA | 06/17/20 | 72,252 | ||||||||||||||
| KRW | 11,944,684,000 | USD | 9,836,243 | Citibank NA | 06/17/20 | 3,083 | ||||||||||||||
| NOK | 38,473,871 | USD | 3,571,054 | JPMorgan Chase Bank NA | 06/17/20 | 185,250 | ||||||||||||||
| SEK | 4,865,056 | USD | 483,796 | Bank of New York | 06/17/20 | 15,106 | ||||||||||||||
| SEK | 54,696,000 | USD | 5,488,328 | Barclays Bank plc | 06/17/20 | 120,633 | ||||||||||||||
| SEK | 91,168,000 | USD | 8,943,797 | UBS AG | 06/17/20 | 405,292 | ||||||||||||||
| THB | 506,073,000 | USD | 15,566,687 | HSBC Bank plc | 06/17/20 | 74,912 | ||||||||||||||
| THB | 660,397,000 | USD | 20,066,758 | Morgan Stanley & Co. International plc | 06/17/20 | 344,656 | ||||||||||||||
| 20 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
Forward Foreign Currency Exchange Contracts (continued)
| Currency Purchased |
Currency Sold |
Counterparty |
Settlement Date |
Unrealized Appreciation (Depreciation) |
||||||||||||||||
| USD | 662,938 | AUD | 1,005,000 | Morgan Stanley & Co. International plc | 06/17/20 | $ | 7,941 | |||||||||||||
| USD | 10,064,720 | BRL | 51,008,000 | Citibank NA | 06/17/20 | 716,945 | ||||||||||||||
| USD | 11,520,875 | BRL | 54,776,000 | JPMorgan Chase Bank NA | 06/17/20 | 1,482,573 | ||||||||||||||
| USD | 11,602,439 | BRL | 55,187,000 | Morgan Stanley & Co. International plc | 06/17/20 | 1,488,816 | ||||||||||||||
| USD | 50,599,803 | CAD | 68,978,824 | Morgan Stanley & Co. International plc | 06/17/20 | 1,039,997 | ||||||||||||||
| USD | 2,224,026 | CHF | 2,054,000 | Morgan Stanley & Co. International plc | 06/17/20 | 93,364 | ||||||||||||||
| USD | 5,259,976 | EUR | 4,608,979 | Goldman Sachs International | 06/17/20 | 204,639 | ||||||||||||||
| USD | 1,511,325 | EUR | 1,374,000 | JPMorgan Chase Bank NA | 06/17/20 | 4,259 | ||||||||||||||
| USD | 9,503,043 | EUR | 8,295,000 | Morgan Stanley & Co. International plc | 06/17/20 | 404,710 | ||||||||||||||
| USD | 1,346,696 | GBP | 1,035,000 | Morgan Stanley & Co. International plc | 06/17/20 | 42,866 | ||||||||||||||
| USD | 16,111,825 | GBP | 12,292,000 | UBS AG | 06/17/20 | 627,117 | ||||||||||||||
| USD | 1,235,297 | JPY | 129,756,000 | Goldman Sachs International | 06/17/20 | 25,379 | ||||||||||||||
| USD | 37,425,274 | JPY | 3,817,313,241 | Morgan Stanley & Co. International plc | 06/17/20 | 1,830,500 | ||||||||||||||
| USD | 72,208,356 | KRW | 86,610,312,000 | JPMorgan Chase Bank NA | 06/17/20 | 863,890 | ||||||||||||||
| USD | 13,420,888 | MXN | 321,747,000 | Morgan Stanley & Co. International plc | 06/17/20 | 167,702 | ||||||||||||||
| USD | 665,961 | MYR | 2,831,000 | Morgan Stanley & Co. International plc | 06/17/20 | 8,895 | ||||||||||||||
| USD | 30,283 | NOK | 288,000 | HSBC Bank plc | 06/17/20 | 2,165 | ||||||||||||||
| USD | 8,843 | NZD | 14,000 | Bank of New York | 06/17/20 | 257 | ||||||||||||||
| USD | 770,273 | SEK | 7,194,000 | Goldman Sachs International | 06/17/20 | 32,543 | ||||||||||||||
| USD | 17,556,501 | SEK | 163,922,000 | Morgan Stanley & Co. International plc | 06/17/20 | 746,639 | ||||||||||||||
| USD | 704,671 | SGD | 975,000 | HSBC Bank plc | 06/17/20 | 13,123 | ||||||||||||||
| USD | 9,351,165 | THB | 294,589,000 | BNP Paribas SA | 06/17/20 | 246,069 | ||||||||||||||
| USD | 4,552,050 | ZAR | 82,934,000 | Credit Suisse International | 06/17/20 | 98,529 | ||||||||||||||
|
|
|
|||||||||||||||||||
| 13,888,008 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| AUD | 2,104,000 | USD | 1,386,598 | HSBC Bank plc | 06/17/20 | (15,340) | ||||||||||||||
| AUD | 43,338,000 | USD | 28,587,478 | Morgan Stanley & Co. International plc | 06/17/20 | (342,428) | ||||||||||||||
| CHF | 6,981,000 | USD | 7,295,081 | JPMorgan Chase Bank NA | 06/17/20 | (53,528) | ||||||||||||||
| EUR | 1,532,299 | SEK | 16,414,000 | Goldman Sachs International | 06/17/20 | (2,527) | ||||||||||||||
| EUR | 6,965,000 | USD | 7,684,858 | JPMorgan Chase Bank NA | 06/17/20 | (45,330) | ||||||||||||||
| EUR | 103,038,405 | USD | 117,901,777 | Morgan Stanley & Co. International plc | 06/17/20 | (4,884,582) | ||||||||||||||
| EUR | 1,503,000 | USD | 1,701,385 | State Street Bank and Trust Co. | 06/17/20 | (52,826) | ||||||||||||||
| GBP | 3,547,000 | USD | 4,648,972 | Citibank NA | 06/17/20 | (180,679) | ||||||||||||||
| GBP | 4,164,000 | USD | 5,260,362 | HSBC Bank plc | 06/17/20 | (14,810) | ||||||||||||||
| INR | 1,870,449,000 | USD | 24,759,402 | Morgan Stanley & Co. International plc | 06/17/20 | (111,654) | ||||||||||||||
| JPY | 38,047,000 | USD | 372,986 | Citibank NA | 06/17/20 | (18,214) | ||||||||||||||
| JPY | 177,785,000 | USD | 1,703,308 | Morgan Stanley & Co. International plc | 06/17/20 | (45,541) | ||||||||||||||
| JPY | 2,228,190,937 | USD | 21,239,136 | UBS AG | 06/17/20 | (462,232) | ||||||||||||||
| KRW | 9,396,097,000 | USD | 7,833,345 | HSBC Bank plc | 06/17/20 | (93,394) | ||||||||||||||
| KRW | 4,126,037,000 | USD | 3,439,941 | JPMorgan Chase Bank NA | 06/17/20 | (41,155) | ||||||||||||||
| MXN | 1,118,287,000 | USD | 50,596,643 | Barclays Bank plc | 06/17/20 | (4,532,918) | ||||||||||||||
| MXN | 118,569,000 | USD | 4,953,458 | UBS AG | 06/17/20 | (69,444) | ||||||||||||||
| PLN | 56,551,000 | USD | 14,930,114 | BNP Paribas SA | 06/17/20 | (1,303,434) | ||||||||||||||
| SEK | 31,212,000 | USD | 3,342,601 | Northern Trust Co. | 06/17/20 | (141,875) | ||||||||||||||
| SGD | 983,000 | USD | 710,451 | HSBC Bank plc | 06/17/20 | (13,230) | ||||||||||||||
| USD | 3,917,044 | AUD | 6,532,000 | Goldman Sachs International | 06/17/20 | (340,113) | ||||||||||||||
| USD | 12,428,102 | AUD | 20,732,000 | JPMorgan Chase Bank NA | 06/17/20 | (1,083,743) | ||||||||||||||
| USD | 19,997,465 | AUD | 31,738,000 | UBS AG | 06/17/20 | (687,417) | ||||||||||||||
| USD | 4,585,821 | CAD | 6,666,000 | Bank of New York | 06/17/20 | (203,557) | ||||||||||||||
| USD | 8,548,112 | CAD | 12,245,000 | JPMorgan Chase Bank NA | 06/17/20 | (249,658) | ||||||||||||||
| USD | 5,050,894 | CAD | 7,343,000 | State Street Bank and Trust Co. | 06/17/20 | (224,894) | ||||||||||||||
| USD | 6,301,319 | CHF | 6,123,723 | State Street Bank and Trust Co. | 06/17/20 | (50,960) | ||||||||||||||
| USD | 5,022,644 | EUR | 4,635,000 | Bank of America NA | 06/17/20 | (61,235) | ||||||||||||||
| USD | 1,889,913 | EUR | 1,749,000 | Bank of New York | 06/17/20 | (28,469) | ||||||||||||||
| USD | 795,747 | EUR | 728,000 | JPMorgan Chase Bank NA | 06/17/20 | (2,756) | ||||||||||||||
| USD | 30,579,474 | EUR | 28,528,644 | Morgan Stanley & Co. International plc | 06/17/20 | (712,036) | ||||||||||||||
| USD | 9,573,436 | EUR | 8,744,439 | UBS AG | 06/17/20 | (17,861) | ||||||||||||||
| USD | 7,473,909 | GBP | 6,297,000 | BNP Paribas SA | 06/17/20 | (458,665) | ||||||||||||||
| USD | 3,867,185 | GBP | 3,187,000 | Citibank NA | 06/17/20 | (147,602) | ||||||||||||||
| USD | 1,248,518 | GBP | 1,047,228 | JPMorgan Chase Bank NA | 06/17/20 | (70,716) | ||||||||||||||
| USD | 2,890,334 | GBP | 2,503,000 | Morgan Stanley & Co. International plc | 06/17/20 | (262,792) | ||||||||||||||
| USD | 10,095,473 | INR | 782,589,000 | Goldman Sachs International | 06/17/20 | (217,054) | ||||||||||||||
| USD | 2,363,624 | JPY | 261,469,000 | Citibank NA | 06/17/20 | (74,460) | ||||||||||||||
| SCHEDULE OF INVESTMENTS | 21 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
Forward Foreign Currency Exchange Contracts (continued)
| Currency Purchased |
Currency Sold |
Counterparty | Settlement Date |
Unrealized Appreciation |
||||||||||||||||
| USD | 538,469 | JPY | 58,723,634 | Goldman Sachs International | 06/17/20 | $ | (9,103) | |||||||||||||
| USD | 17,938,598 | JPY | 1,933,465,000 | JPMorgan Chase Bank NA | 06/17/20 | (90,116) | ||||||||||||||
| USD | 3,671,991 | NOK | 41,077,000 | HSBC Bank plc | 06/17/20 | (338,463) | ||||||||||||||
| USD | 2,939,177 | NOK | 30,782,000 | JPMorgan Chase Bank NA | 06/17/20 | (66,149) | ||||||||||||||
| USD | 539,115 | NZD | 922,769 | JPMorgan Chase Bank NA | 06/17/20 | (26,786) | ||||||||||||||
| USD | 1,233,264 | NZD | 2,077,000 | Morgan Stanley & Co. International plc | 06/17/20 | (40,485) | ||||||||||||||
| USD | 6,010,293 | PLN | 25,005,000 | BNP Paribas SA | 06/17/20 | (14,978) | ||||||||||||||
| USD | 8,800,041 | PLN | 36,874,010 | Citibank NA | 06/17/20 | (85,219) | ||||||||||||||
| USD | 7,479,300 | PLN | 31,354,990 | JPMorgan Chase Bank NA | 06/17/20 | (76,082) | ||||||||||||||
| USD | 6,011,967 | SEK | 60,207,000 | Barclays Bank plc | 06/17/20 | (162,136) | ||||||||||||||
| USD | 2,493,127 | SEK | 24,574,000 | JPMorgan Chase Bank NA | 06/17/20 | (26,886) | ||||||||||||||
| USD | 1,468,006 | SEK | 15,233,000 | Morgan Stanley & Co. International plc | 06/17/20 | (94,106) | ||||||||||||||
| USD | 1,523,682 | SGD | 2,178,000 | Morgan Stanley & Co. International plc | 06/17/20 | (21,128) | ||||||||||||||
| USD | 714,357 | SGD | 1,032,965 | State Street Bank and Trust Co. | 06/17/20 | (18,304) | ||||||||||||||
| USD | 7,122,018 | THB | 233,615,000 | Westpac Banking Corp. | 06/17/20 | (98,506) | ||||||||||||||
| USD | 8,737,486 | ZAR | 164,702,000 | JPMorgan Chase Bank NA | 06/17/20 | (106,942) | ||||||||||||||
| ZAR | 141,105,606 | USD | 8,131,435 | Bank of America NA | 06/17/20 | (554,124) | ||||||||||||||
| ZAR | 33,203,394 | USD | 1,914,447 | BNP Paribas SA | 06/17/20 | (131,438) | ||||||||||||||
| ZAR | 275,033,000 | USD | 17,005,688 | HSBC Bank plc | 06/17/20 | (2,236,532) | ||||||||||||||
|
|
|
|||||||||||||||||||
| (21,516,612) | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| Net Unrealized Depreciation |
|
$ | (7,628,604) | |||||||||||||||||
|
|
|
|||||||||||||||||||
Centrally Cleared Interest Rate Swaps
| Paid by the Fund | Received by the Fund |
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Rate | Frequency | Rate | Frequency | Effective Date |
Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||
| 28 day MXIBTIIE | Monthly | 6.35% | Monthly | 09/17/20 | (a) | 09/11/25 | MXN | 3,526,000 | $ | 5,094,374 | $ | — | $ | 5,094,374 | ||||||||||||||||||
| 0.57% | Semi-Annual | 3 month LIBOR | Quarterly | 09/16/20 | (a) | 09/15/25 | USD | 47,000 | (353,150) | (11,413) | (341,737) | |||||||||||||||||||||
| 6 month BBR | Semi-Annual | 0.72% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | AUD | 457,514 | 2,557,670 | — | 2,557,670 | |||||||||||||||||||||
| 3 month BA | Semi-Annual | 0.86% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | CAD | 34,000 | 69,170 | — | 69,170 | |||||||||||||||||||||
| 3 month BA | Semi-Annual | 0.87% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | CAD | 88,000 | 214,320 | — | 214,320 | |||||||||||||||||||||
| 3 month BA | Semi-Annual | 0.96% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | CAD | 121,000 | 661,344 | — | 661,344 | |||||||||||||||||||||
| 3 month BA | Semi-Annual | 1.06% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | CAD | 76,000 | 686,326 | (11,812) | 698,138 | |||||||||||||||||||||
| 6 month SOR | Semi-Annual | 1.53% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | SGD | 31,000 | 868,609 | — | 868,609 | |||||||||||||||||||||
| 6 month SOR | Semi-Annual | 1.63% | Semi-Annual | 09/16/20 | (a) | 09/16/25 | SGD | 31,000 | 978,299 | — | 978,299 | |||||||||||||||||||||
| 0.53% | Semi-Annual | 3 month LIBOR | Quarterly | 09/16/20 | (a) | 09/16/25 | USD | 46,000 | (258,356) | 38,394 | (296,750) | |||||||||||||||||||||
| 0.61% | Semi-Annual | 3 month LIBOR | Quarterly | 09/16/20 | (a) | 09/16/25 | USD | 85,000 | (816,244) | (17,253) | (798,991) | |||||||||||||||||||||
| 0.51% | Semi-Annual | 3 month LIBOR | Quarterly | 09/16/20 | (a) | 09/16/25 | USD | 71,000 | (328,008) | 14,158 | (342,166) | |||||||||||||||||||||
| 0.32% | Annual | 3 month STIBOR | Quarterly | 09/16/20 | (a) | 09/16/25 | SEK | 442,000 | (367,212) | 24,381 | (391,593) | |||||||||||||||||||||
| (0.39)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 61,000 | 212,162 | (7,118) | 219,280 | |||||||||||||||||||||
| (0.39)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 25,000 | 91,279 | 4,567 | 86,712 | |||||||||||||||||||||
| (0.22)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 40,000 | (237,271) | 5,605 | (242,876) | |||||||||||||||||||||
| (0.22)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 57,000 | (323,056) | (8,582) | (314,474) | |||||||||||||||||||||
| (0.18)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 40,000 | (313,595) | (5,921) | (307,674) | |||||||||||||||||||||
| (0.17)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 85,000 | (712,906) | 37,402 | (750,308) | |||||||||||||||||||||
| (0.15)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 71,000 | (674,463) | (47,770) | (626,693) | |||||||||||||||||||||
| (0.14)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 47,000 | (497,655) | (13,386) | (484,269) | |||||||||||||||||||||
| (0.21)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20 | (a) | 09/16/25 | EUR | 58,000 | (379,378) | 22,276 | (401,654) | |||||||||||||||||||||
| 22 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
| Centrally Cleared Interest Rate Swaps (continued) |
| Paid by the Fund
|
Received by the Fund
|
|
|
|
|
|
|
|||||||||||||||||||||||||
| Rate | Frequency | Rate | Frequency | Effective Date |
Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||
| (0.22)% | Annual | 6 month EURIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | EUR | 53,000 | $ | (308,228) | $ | 71,877 | $ | (380,105) | |||||||||||||||||||
| 0.48% | Semi-Annual | 6 month GBP LIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | GBP | 50,000 | (207,148) | (831) | (206,317) | ||||||||||||||||||||||
| 0.53% | Semi-Annual | 6 month GBP LIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | GBP | 42,000 | (297,381) | 6,948 | (304,329) | ||||||||||||||||||||||
| 0.51% | Semi-Annual | 6 month GBP LIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | GBP | 42,000 | (258,707) | 36,347 | (295,054) | ||||||||||||||||||||||
| 0.47% | Semi-Annual | 6 month GBP LIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | GBP | 29,000 | (96,828) | (9,228) | (87,600) | ||||||||||||||||||||||
| 0.86% | Annual | 6 month WIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | PLN | 106,000 | (385,162) | — | (385,162) | ||||||||||||||||||||||
| 0.92% | Annual | 6 month WIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | PLN | 113,000 | (492,267) | — | (492,267) | ||||||||||||||||||||||
| 1.09% | Annual | 6 month WIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | PLN | 48,000 | (304,505) | — | (304,505) | ||||||||||||||||||||||
| 1.10% | Annual | 6 month WIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | PLN | 119,000 | (776,420) | — | (776,420) | ||||||||||||||||||||||
| 1.38% | Annual | 6 month WIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | PLN | 167,000 | (1,652,848) | — | (1,652,848) | ||||||||||||||||||||||
| 1.36% | Annual | 6 month WIBOR | Semi-Annual | 09/16/20(a) | 09/16/25 | PLN | 176,000 | (1,688,925) | — | (1,688,925) | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 6.46% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 213,750 | 95,200 | — | 95,200 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 6.50% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 261,250 | 140,971 | — | 140,971 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 6.60% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 324,615 | 251,627 | — | 251,627 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 6.62% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 476,900 | 392,138 | — | 392,138 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 6.77% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 527,100 | 619,657 | — | 619,657 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 7.20% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 598,000 | 1,308,711 | — | 1,308,711 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 7.50% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 779,000 | 2,255,315 | — | 2,255,315 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 7.65% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 193,725 | 629,310 | — | 629,310 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 7.97% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 248,676 | 995,264 | — | 995,264 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 7.98% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 259,776 | 1,045,806 | — | 1,045,806 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 8.06% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 229,548 | 967,369 | — | 967,369 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 8.18% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 278,775 | 1,253,626 | — | 1,253,626 | ||||||||||||||||||||||
| 3 month JIBAR | Quarterly | 8.48% | Quarterly | 09/16/20(a) | 09/16/25 | ZAR | 283,500 | 1,475,214 | — | 1,475,214 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 11,134,048 | $ | 128,641 | $ | 11,005,407 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| (a) | Forward swap. |
OTC Interest Rate Swaps
| Paid by the Fund
|
Received by the Fund
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| Rate | Frequency | Rate | Frequency | Counterparty | Effective Date |
Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||||||
| 1 day BZDIOVER | At Termination | 4.80% | At Termination | BNP Paribas SA | N/A | 01/02/23 | BRL | 246,000 | $ | — | $ | — | $ | — | ||||||||||||||||||||||
| 0.94% | Semi-Annual | 6 month THBFIX | Semi-Annual | Bank of America NA | 09/16/20(a) | 09/16/25 | THB | 512,550 | (60,753) | — | (60,753) | |||||||||||||||||||||||||
| 0.95% | Semi-Annual | 6 month THBFIX | Semi-Annual | Bank of America NA | 09/16/20(a) | 09/16/25 | THB | 626,450 | (85,605) | — | (85,605) | |||||||||||||||||||||||||
| 0.99% | Semi-Annual | 6 month THBFIX | Semi-Annual | Bank of America NA | 09/16/20(a) | 09/16/25 | THB | 822,440 | (162,062) | — | (162,062) | |||||||||||||||||||||||||
| 1 day MIBOR | Semi-Annual | 4.70% | Semi-Annual | Bank of America NA | 09/16/20(a) | 09/16/25 | INR | 2,266,000 | 645,126 | — | 645,126 | |||||||||||||||||||||||||
| 1.00% | Semi-Annual | 6 month THBFIX | Semi-Annual | Bank of America NA | 09/16/20(a) | 09/16/25 | THB | 595,560 | (121,852) | — | (121,852) | |||||||||||||||||||||||||
| 3 month TWCPBA | Quarterly | 0.48% | Quarterly | Bank of America NA | 09/16/20(a) | 09/16/25 | TWD | 1,058,000 | (75,458) | — | (75,458) | |||||||||||||||||||||||||
| 1 week CNREPOFI | Quarterly | 1.91% | Quarterly | BNP Paribas SA | 09/16/20(a) | 09/16/25 | CNY | 165,900 | 61,904 | — | 61,904 | |||||||||||||||||||||||||
| 1 day MIBOR | Semi-Annual | 5.40% | Semi-Annual | Citibank NA | 09/16/20(a) | 09/16/25 | INR | 1,791,350 | 1,249,658 | — | 1,249,658 | |||||||||||||||||||||||||
| SCHEDULE OF INVESTMENTS | 23 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
OTC Interest Rate Swaps (continued)
|
Paid by the Fund
|
Received by the Fund
|
Counterparty |
Effective Date |
Termination Date |
|
Notional Amount (000) |
Value |
Upfront Premium Paid (Received) |
Unrealized (Depreciation) |
|||||||||||||||||||||||||
|
Rate |
Frequency | Rate | Frequency | |||||||||||||||||||||||||||||||
| 1 week CNREPOFI |
Quarterly | 1.96% | Quarterly | Citibank NA | 09/16/20 | (a) | 09/16/25 | CNY | 248,000 | $ | 175,839 | $ | — | $ | 175,839 | |||||||||||||||||||
| 1.01% | Quarterly | 3 month CD_KSDA | Quarterly | Citibank NA | 09/16/20 | (a) | 09/16/25 | KRW | 34,255,650 | (46,660) | — | (46,660) | ||||||||||||||||||||||
| 1.02% | Quarterly | 3 month CD_KSDA | Quarterly | CitibankNA | 09/16/20 | (a) | 09/16/25 | KRW | 18,445,350 | (34,696) | — | (34,696) | ||||||||||||||||||||||
| 1 day MIBOR |
Semi-Annual | 4.78% | Semi-Annual | HSBC Bank plc | 09/16/20 | (a) | 09/16/25 | INR | 738,525 | 245,107 | — | 245,107 | ||||||||||||||||||||||
| 1 day MIBOR |
Semi-Annual | 4.87% | Semi-Annual | HSBC Bank plc | 09/16/20 | (a) | 09/16/25 | INR | 895,480 | 344,738 | — | 344,738 | ||||||||||||||||||||||
| 1 week CNREPOFI |
Quarterly | 1.92% | Quarterly | HSBC Bank plc | 09/16/20 | (a) | 09/16/25 | CNY | 229,100 | 93,182 | — | 93,182 | ||||||||||||||||||||||
| 1 day MIBOR |
Semi-Annual | 5.39% | Semi-Annual | JPMorgan Chase Bank NA |
09/16/20 | (a) | 09/16/25 | INR | 1,465,650 | 1,009,480 | — | 1,009,480 | ||||||||||||||||||||||
| 0.88% | Semi-Annual | 6 month THBFIX | Semi-Annual | Morgan Stanley & Co. International plc |
09/16/20 | (a) | 09/16/25 | THB | 617,650 | (19,/17) | — | (19,/17) | ||||||||||||||||||||||
| 0.88% | Semi-Annual | 6 month THBFIX | Semi-Annual | Morgan Stanley & Co. International plc |
09/16/20 | (a) | 09/16/25 | THB | 505,350 | (17,549) | — | (17,549) | ||||||||||||||||||||||
| 0.98% | Semi-Annual | 6 month THBFIX | Semi-Annual | Morgan Stanley & Co. International plc |
09/16/20 | (a) | 09/16/25 | THB | 2,434,000 | (442,867) | — | (442,867) | ||||||||||||||||||||||
| 1 day MIBOR |
Semi-Annual | 4.84% | Semi-Annual | Morgan Stanley & Co. International plc |
09/16/20 | (a) | 09/16/25 | INR | 1,407,959 | 519,606 | — | 519,606 | ||||||||||||||||||||||
| 1 day MIBOR |
Semi-Annual | 4.88% | Semi-Annual | Nomura International plc |
09/16/20 | (a) | 09/16/25 | INR | 1,514,590 | 592,014 | — | 592,014 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| $ | 3,870,035 | $ | — | $ | 3,870,035 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| (a) | Forward swap. |
OTC Total Return Swaps
| Reference Entity | Fixed Amount Paid / (Received) by the Fund(a) |
Counterparty | Termination Date |
Notional Amount (000) |
Value | Upfront Premium Paid (Received) |
Unrealized Appreciation (Depreciation) |
|||||||||||||||||||||||||
| Taiwan Capitalization Weighted Stock Index Future May 2020 |
TWD | (196,931,866) | Merrill Lynch International & Co. | 05/20/20 | TWD | 196,932 | $ | (445,598 | ) | $ | — | $ | (445,598 | ) | ||||||||||||||||||
| Taiwan Capitalization Weighted Stock Index Future May 2020 |
TWD | (468,016,116) | Merrill Lynch International & Co. | 05/20/20 | TWD | 468,016 | (1,563,496 | ) | — | (1,563,496 | ) | |||||||||||||||||||||
| Taiwan Capitalization Weighted Stock Index Future May 2020 |
TWD | (534,965,640) | Merrill Lynch International & Co. | 05/20/20 | TWD | 534,966 | (1,226,363 | ) | — | (1,226,363 | ) | |||||||||||||||||||||
| KOSPI 200 Index Futures June 2020 |
KRW | (7,950,817,350) | Merrill Lynch International & Co. | 06/11/20 | KRW | 7,950,817 | (147,181 | ) | — | (147,181 | ) | |||||||||||||||||||||
| KOSPI 200 Index Futures June 2020 |
KRW | (49,799,403,625) | Merrill Lynch International & Co. | 06/11/20 | KRW | 49,799,404 | 888,858 | — | 888,858 | |||||||||||||||||||||||
| KOSPI 200 Index Futures June 2020 |
KRW | (37,958,348,950) | Merrill Lynch International & Co. | 06/11/20 | KRW | 37,958,349 | (1,627,170 | ) | — | (1,627,170 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | (4,120,950 | ) | $ | — | $ | (4,120,950 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| (a) | At termination, the fixed amount paid (received) will be exchanged for the total return of the reference entity. |
| 24 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
The following reference rates, and their values as of period end, are used for security descriptions:
| Reference Index | Reference Rate | |||||
| 1 day BZDIOVER |
Overnight Brazil CETIP — Interbank Rate | 0.01 | % | |||
| 1 day MIBOR |
Mumbai Interbank Offered Rate | 4.41 | ||||
| 1 week CNREPOFI |
China Fixing Repo Rates | 1.93 | ||||
| 28 day MXIBTIIE |
Mexico Interbank TllE 28-Day | 6.25 | ||||
| 3 month BA |
Canadian Bankers Acceptances | 0.67 | ||||
| 3 month CD_KSDA |
Certificates of Deposit by the Korean Securities Dealers Association | 1.10 | ||||
| 3 month JIBAR |
Johannesburg Interbank Average Rate | 4.98 | ||||
| 3 month LIBOR |
London Interbank Offered Rate | 0.56 | ||||
| 3 month STIBOR |
Stockholm Interbank Offered Rate | 0.26 | ||||
| 3 month TWCPBA |
Taiwan Secondary Markets Bills Rate | 0.64 | ||||
| 6 month BBR |
Australian Bank Bill Rate | 0.17 | ||||
| 6 month EURIBOR |
Euro Interbank Offered Rate | (0.17 | ) | |||
| 6 month GBP LIBOR |
London Interbank Offered Rate | 0.68 | ||||
| 6 month SOR |
Singapore Interbank Offered Rate | 1.05 | ||||
| 6 month THBFIX |
Thai Baht Interest Rate Fixing | 0.74 | ||||
| 6 month WIBOR |
Warsaw Interbank Offered Rate | 0.59 | ||||
Balances Reported in the Statement of Assets and Liabilities for Centrally Cleared Swaps and OTC Swaps
| Swap Premiums Paid |
Swap Premiums Received |
Unrealized Appreciation |
Unrealized Depreciation |
|||||||||||||
| Centrally Cleared Swaps(a) |
$ | 261,955 | $ | (133,314) | $ | 22,878,124 | $ | (11,872,717) | ||||||||
| OTC Swaps |
— | — | 5,825,512 | (6,076,427 | ) | |||||||||||
| (a) | Includes cumulative appreciation (depreciation) on centrally cleared swaps, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities and is net of any previously paid (received) swap premium amounts. |
Derivative Financial Instruments Categorized by Risk Exposure
As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Assets — Derivative Financial Instruments |
|
|||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized appreciation on futures contracts(a) |
$ | — | $ | — | $ | 17,929,224 | $ | — | $ | 7,486,214 | $ | — | $ | 25,415,438 | ||||||||||||||
| Forward foreign currency exchange contracts |
||||||||||||||||||||||||||||
| Unrealized appreciation on forward foreign currency exchange contracts |
— | — | — | 13,888,008 | — | — | 13,888,008 | |||||||||||||||||||||
| Swaps — centrally cleared |
||||||||||||||||||||||||||||
| Unrealized appreciation on centrally cleared swaps(a) |
— | — | — | — | 22,878,124 | — | 22,878,124 | |||||||||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized appreciation on OTC swaps; Swap premiums paid |
— | — | 888,858 | — | 4,936,654 | — | 5,825,512 | |||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| $ | — | $ | — | $ | 18,818,082 | $ | 13,888,008 | $ | 35,300,992 | $ | — | $ | 68,007,082 | |||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Liabilities — Derivative Financial Instruments | ||||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on futures contracts(a) |
— | — | 66,416,245 | — | 5,278,825 | — | 71,695,070 | |||||||||||||||||||||
| Forward foreign currency exchange contracts |
||||||||||||||||||||||||||||
| Unrealized depreciation on forward foreign currency exchange contracts |
— | — | — | 21,516,612 | — | — | 21,516,612 | |||||||||||||||||||||
| Swaps — centrally cleared |
||||||||||||||||||||||||||||
| Unrealized depreciation on centrally cleared swaps(a) |
— | — | — | — | 11,872,717 | — | 11,872,717 | |||||||||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized depreciation on OTC swaps; Swap premiums received |
— | — | 5,009,808 | — | 1,066,619 | — | 6,076,427 | |||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| $ | — | $ | — | $ | 71,426,053 | $ | 21,516,612 | $ | 18,218,161 | $ | — | $ | 111,160,826 | |||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| SCHEDULE OF INVESTMENTS | 25 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statement of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
For the period ended April 30, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Net Realized Gain (Loss) from: |
|
|||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 62,746,526 | $ | — | $ | 3,819,709 | $ | — | $ | 66,566,235 | ||||||||||||||
| Forward foreign currency exchange contracts |
— | — | — | (8,998,610 | ) | — | — | (8,998,610 | ) | |||||||||||||||||||
| Swaps |
— | — | 23,291,811 | — | 23,022,342 | — | 46,314,153 | |||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| $ | — | $ | — | $ | 86,038,337 | $ | (8,998,610 | ) | $ | 26,842,051 | $ | — | $ | 103,881,778 | ||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net Change in Unrealized Appreciation |
||||||||||||||||||||||||||||
| (Depreciation) on: |
||||||||||||||||||||||||||||
| Futures contracts |
— | — | (54,012,694 | ) | — | (5,204,089 | ) | — | (59,216,783 | ) | ||||||||||||||||||
| Forward foreign currency exchange contracts |
— | — | — | (5,911,927 | ) | — | — | (5,911,927 | ) | |||||||||||||||||||
| Swaps |
— | — | (7,894,490 | ) | — | 10,108,408 | — | 2,213,918 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| $ | — | $ | — | $ | (61,907,184 | ) | $ | (5,911,927 | ) | $ | 4,904,319 | $ | — | $ | (62,914,792 | ) | ||||||||||||
|
|
|
|||||||||||||||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts: |
||||
| Average notional value of contracts — long |
$ | 1,163,597,472 | ||
| Average notional value of contracts — short |
1,246,364,004 | |||
| Forward foreign currency exchange contracts: |
||||
| Average amounts purchased — in USD |
406,410,067 | |||
| Average amounts sold — in USD |
441,634,881 | |||
| Interest rate swaps: |
||||
| Average notional value — pays fixed rate |
1,472,720,122 | |||
| Average notional value — receives fixed rate |
1,244,393,912 | |||
| Total return swaps: |
||||
| Average notional value |
112,003,928 |
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Derivative Financial Instruments — Offsetting as of Period End
The Fund’s derivative assets and liabilities (by type) were as follows:
| Assets | Liabilities | |||||||
| Derivative Financial Instruments: |
||||||||
| Futures contracts |
$ | 16,327,925 | $ | 11,564,815 | ||||
| Forward foreign currency exchange contracts |
13,888,008 | 21,516,612 | ||||||
| Swaps — Centrally cleared |
2,956,042 | — | ||||||
| Swaps — OTC(a) |
5,825,512 | 6,076,427 | ||||||
|
|
|
|||||||
| Total derivative assets and liabilities in the Statement of Assets and Liabilities |
$ | 38,997,487 | $ | 39,157,854 | ||||
| Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) |
(19,283,967 | ) | (11,564,815 | ) | ||||
|
|
|
|||||||
| Total derivative assets and liabilities subject to an MNA |
$ | 19,713,520 | $ | 27,593,039 | ||||
|
|
|
|||||||
| (a) | Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums paid/received in the Statement of Assets and Liabilities. |
| 26 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
The following tables present the Fund’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund:
| Counterparty |
Derivative
|
Derivatives
|
Non-cash
|
Cash
|
Net Amount
|
|||||||||||||||
|
Bank of America NA |
$ | 945,137 | $ | (945,137) | $ | — | $ | — | $ | — | ||||||||||
| Bank of New York |
22,493 | (22,493) | — | — | — | |||||||||||||||
| Barclays Bank plc |
120,633 | (120,633) | — | — | — | |||||||||||||||
| BNP Paribas SA |
380,225 | (380,225) | — | — | — | |||||||||||||||
| Citibank NA |
2,802,270 | (587,530) | — | (2,030,000) | 184,740 | |||||||||||||||
| Credit Suisse International |
98,529 | — | — | — | 98,529 | |||||||||||||||
| Goldman Sachs International |
325,853 | (325,853) | — | — | — | |||||||||||||||
| HSBC Bank plc |
773,227 | (773,227) | — | — | — | |||||||||||||||
| JPMorgan Chase Bank NA |
4,088,906 | (1 ,939,847) | — | (2,149,059) | — | |||||||||||||||
| Merrill Lynch International & Co. |
888,858 | (888,858) | — | — | — | |||||||||||||||
| Morgan Stanley & Co. International plc |
7,241,007 | (6,994,285) | — | (246,722) | — | |||||||||||||||
| Nomura International plc |
592,014 | — | — | (470,000) | 122,014 | |||||||||||||||
| Standard Chartered Bank |
42,917 | — | — | — | 42,917 | |||||||||||||||
| UBS AG |
1,391,451 | (1,236,954) | — | — | 154,497 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 19,713,520 | $ | (14,215,042) | $ | — | $ | (4,895,781) | $ | 602,697 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Counterparty |
Derivative
|
Derivatives
|
Non-cash
|
Cash
|
Net Amount of
|
|||||||||||||||
|
Bank of America NA |
$ | 1,121,089 | $ | (945,137) | $ | — | $ | — | $ | 175,952 | ||||||||||
| Bank of New York |
232,026 | (22,493) | — | — | 209,533 | |||||||||||||||
| Barclays Bank plc |
4,695,054 | (120,633) | — | — | 4,574,421 | |||||||||||||||
| BNP Paribas SA |
1,908,515 | (380,225) | — | — | 1,528,290 | |||||||||||||||
| Citibank NA |
587,530 | (587,530) | — | — | — | |||||||||||||||
| Goldman Sachs International |
568,797 | (325,853) | — | — | 242,944 | |||||||||||||||
| HSBC Bank plc |
2,711,769 | (773,227) | — | — | 1,938,542 | |||||||||||||||
| JPMorgan Chase Bank NA |
1,939,847 | (1,939,847) | — | — | — | |||||||||||||||
| Merrill Lynch International & Co. |
5,009,808 | (888,858) | — | — | 4,120,950 | |||||||||||||||
| Morgan Stanley & Co. International plc |
6,994,285 | (6,994,285) | — | — | — | |||||||||||||||
| Northern Trust Co. |
141,875 | — | — | — | 141 ,875 | |||||||||||||||
| State Street Bank and Trust Co. |
346,984 | — | — | — | 346,984 | |||||||||||||||
| UBS AG |
1,236,954 | (1,236,954) | — | — | — | |||||||||||||||
| Westpac Banking Corp. |
98,506 | — | — | — | 98,506 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 27,593,039 | $ | (14,215,042) | $ | — | $ | — | $ | 13,377,997 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA. |
| (b) | Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. |
| (c) | Net amount represents the net amount receivable from the counterparty in the event of default. |
| (d) | Net amount may also include forward foreign currency exchange contracts that are not required to be collateralized. |
| (e) | Net amount represents the net amount payable due to the counterparty in the event of default. |
| SCHEDULE OF INVESTMENTS | 27 |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of investments and derivative financial instruments. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, refer to the Notes to Financial Statements.
The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Investments: |
||||||||||||||||
| Long-Term Investments: |
||||||||||||||||
| Common Stocks: |
||||||||||||||||
| Aerospace & Defense |
$ | 1,656,750 | $ | 440,089 | $ | — | $ | 2,096,839 | ||||||||
| Air Freight & Logistics |
116,621 | 381,286 | — | 497,907 | ||||||||||||
| Airlines |
350,142 | 284,146 | — | 634,288 | ||||||||||||
| Auto Components |
163,373 | 318,653 | — | 482,026 | ||||||||||||
| Automobiles |
3,127,292 | 4,141,762 | — | 7,269,054 | ||||||||||||
| Banks |
13,943,111 | 11,207,935 | — | 25,151,046 | ||||||||||||
| Beverages |
12,914,651 | 4,005,840 | — | 16,920,491 | ||||||||||||
| Biotechnology |
11,595,544 | 1,360,883 | — | 12,956,427 | ||||||||||||
| Building Products |
3,372,860 | 1,626,522 | — | 4,999,382 | ||||||||||||
| Capital Markets |
9,182,362 | 3,789,492 | — | 12,971,854 | ||||||||||||
| Chemicals |
8,900,773 | 3,147,384 | — | 12,048,157 | ||||||||||||
| Commercial Services & Supplies |
2,796,333 | 274,624 | — | 3,070,957 | ||||||||||||
| Communications Equipment |
3,536,369 | 519,300 | — | 4,055,669 | ||||||||||||
| Construction & Engineering |
— | 2,741,640 | — | 2,741,640 | ||||||||||||
| Construction Materials |
1,399,826 | 707,244 | — | 2,107,070 | ||||||||||||
| Consumer Finance |
1,891,752 | 260 | — | 1,892,012 | ||||||||||||
| Containers & Packaging |
1,220,024 | 74,058 | — | 1,294,082 | ||||||||||||
| Distributors |
579,831 | — | — | 579,831 | ||||||||||||
| Diversified Financial Services |
131,495 | 1,174,336 | — | 1,305,831 | ||||||||||||
| Diversified Telecommunication Services |
5,902,976 | 3,861,548 | — | 9,764,524 | ||||||||||||
| Electric Utilities |
4,804,054 | 2,540,447 | 4,704 | 7,349,205 | ||||||||||||
| Electrical Equipment |
2,171,079 | 1,840,349 | — | 4,011,428 | ||||||||||||
| Electronic Equipment, Instruments & Components |
1,602,101 | 2,284,511 | — | 3,886,612 | ||||||||||||
| Entertainment |
6,646,054 | 687,925 | — | 7,333,979 | ||||||||||||
| Equity Real Estate Investment Trusts (REITs) |
10,626,132 | 1,020,215 | — | 11,646,347 | ||||||||||||
| Food & Staples Retailing |
8,213,081 | 4,681,487 | — | 12,894,568 | ||||||||||||
| Food Products |
10,013,894 | 7,333,363 | — | 17,347,257 | ||||||||||||
| Gas Utilities |
— | 1,830,727 | — | 1,830,727 | ||||||||||||
| Health Care Equipment & Supplies |
17,011,356 | 2,379,740 | — | 19,391,096 | ||||||||||||
| Health Care Providers & Services |
15,308,958 | 619,458 | — | 15,928,416 | ||||||||||||
| Health Care Technology |
861,843 | 104,673 | — | 966,516 | ||||||||||||
| Hotels, Restaurants & Leisure |
5,228,043 | 1,974,126 | — | 7,202,169 | ||||||||||||
| Household Durables |
184,495 | 2,229,498 | — | 2,413,993 | ||||||||||||
| Household Products |
1,564,488 | 1,287,294 | — | 2,851,782 | ||||||||||||
| Independent Power and Renewable Electricity Producers |
— | 629,187 | — | 629,187 | ||||||||||||
| Industrial Conglomerates |
2,849,383 | 1,865,011 | — | 4,714,394 | ||||||||||||
| Insurance |
4,485,373 | 5,775,220 | — | 10,260,593 | ||||||||||||
| Interactive Media & Services |
22,525,145 | 305,052 | — | 22,830,197 | ||||||||||||
| Internet & Direct Marketing Retail |
22,712,820 | 338,097 | — | 23,050,917 | ||||||||||||
| IT Services |
24,181,490 | 1,006,155 | — | 25,187,645 | ||||||||||||
| Leisure Products |
270,373 | — | — | 270,373 | ||||||||||||
| Life Sciences Tools & Services |
5,161,849 | 407,070 | — | 5,568,919 | ||||||||||||
| Machinery |
6,049,208 | 3,743,151 | — | 9,792,359 | ||||||||||||
| Media |
3,536,074 | 625,260 | — | 4,161,334 | ||||||||||||
| Metals & Mining |
1,547,377 | 2,953,856 | — | 4,501,233 | ||||||||||||
| Mortgage Real Estate Investment Trusts (REITs) |
152,564 | — | — | 152,564 | ||||||||||||
| Multiline Retail |
5,702,581 | 1,338,374 | — | 7,040,955 | ||||||||||||
| Multi-Utilities |
1,740,463 | 1,705,349 | — | 3,445,812 | ||||||||||||
| Oil, Gas & Consumable Fuels |
7,814,547 | 2,566,418 | — | 10,380,965 | ||||||||||||
| Paper & Forest Products |
— | 237,172 | — | 237,172 | ||||||||||||
| Personal Products |
— | 3,208,315 | — | 3,208,315 | ||||||||||||
| Pharmaceuticals |
22,120,596 | 12,018,103 | — | 34,138,699 | ||||||||||||
| Professional Services |
1,560,742 | 1,083,906 | — | 2,644,648 | ||||||||||||
| Real Estate Management & Development |
180,888 | 1,516,275 | — | 1,697,163 | ||||||||||||
| Road & Rail |
8,914,742 | 2,151,762 | — | 11,066,504 | ||||||||||||
| 28 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) April 30, 2020 |
BlackRock Tactical Opportunities Fund |
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Semiconductors & Semiconductor Equipment |
$ | 14,580,972 | $ | 2,380,085 | $ | — | $ | 16,961,057 | ||||||||
| Software |
36,540,603 | 2,668,987 | — | 39,209,590 | ||||||||||||
| Specialty Retail |
10,548,167 | 1,565,217 | — | 12,113,384 | ||||||||||||
| Technology Hardware, Storage & Peripherals |
20,831,170 | 322,809 | — | 21,153,979 | ||||||||||||
| Textiles, Apparel & Luxury Goods |
3,318,225 | 2,881,650 | — | 6,199,875 | ||||||||||||
| Trading Companies & Distributors |
2,598,367 | 1,372,570 | — | 3,970,937 | ||||||||||||
| Transportation Infrastructure |
— | 2,326,160 | — | 2,326,160 | ||||||||||||
| Water Utilities |
847,373 | 143,805 | — | 991,178 | ||||||||||||
| Wireless Telecommunication Services |
946,133 | 2,890,159 | — | 3,836,292 | ||||||||||||
| Preferred Stocks(a) |
— | 575,614 | — | 575,614 | ||||||||||||
| Rights(a) |
50,855 | 3,118 | — | 53,973 | ||||||||||||
| U.S. Treasury Obligations |
— | 143,204,687 | — | 143,204,687 | ||||||||||||
| Short-Term Securities |
45,699,839 | — | — | 45,699,839 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
| $ | 444,485,582 | $ | 274,679,409 | $ | 4,704 | $ | 719,169,695 | |||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
| Derivative Financial Instruments(b) |
||||||||||||||||
| Assets: |
||||||||||||||||
| Equity contracts |
$ | 17,929,224 | $ | 888,858 | $ | — | $ | 18,818,082 | ||||||||
| Foreign currency exchange contracts |
— | 13,888,008 | — | 13,888,008 | ||||||||||||
| Interest rate contracts |
7,486,214 | 27,814,778 | — | 35,300,992 | ||||||||||||
| Liabilities: |
||||||||||||||||
| Equity contracts |
(66,416,245) | (5,009,808) | — | (71,426,053) | ||||||||||||
| Foreign currency exchange contracts |
— | (21,516,612) | — | (21,516,612) | ||||||||||||
| Interest rate contracts |
(5,278,825) | (12,939,336) | — | (18,218,161) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
| $ | (46,279,632) | $ | 3,125,888 | $ | — | $ | (43,153,744) | |||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
| (a) | See above Schedule of Investments for values in each industry. |
| (b) | Derivative financial instruments are swaps, futures contracts and forward foreign currency exchange contracts. Swaps, futures contracts and forward foreign currency exchange contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
See notes to financial statements.
| SCHEDULE OF INVESTMENTS | 29 |
Statement of Assets and Liabilities
April 30, 2020
| BlackRock Tactical Opportunities Fund |
||||
| ASSETS |
||||
| Investments at value — unaffiliated (cost — $615,295,364) |
$ | 673,469,856 | ||
| Investments at value — affiliated (cost — $45,699,839) |
45,699,839 | |||
| Due from broker |
981,292 | |||
| Cash pledged: |
||||
| Futures contracts |
141,779,756 | |||
| Centrally cleared swaps |
27,660,000 | |||
| Foreign currency at value (cost — $10,533,939) |
10,626,790 | |||
| Receivables: |
||||
| Swaps |
95,122 | |||
| Capital shares sold |
2,231,406 | |||
| Dividends — affiliated |
11,810 | |||
| Dividends — unaffiliated |
1,177,615 | |||
| Interest — unaffiliated |
545,279 | |||
| Variation margin on futures contracts |
16,327,925 | |||
| Variation margin on centrally cleared swaps |
2,956,042 | |||
| Unrealized appreciation on: |
||||
| Forward foreign currency exchange contracts |
13,888,008 | |||
| OTC swaps |
5,825,512 | |||
| Prepaid expenses |
50,754 | |||
|
|
|
|||
| Total assets |
943,327,006 | |||
|
|
|
|||
| LIABILITIES |
||||
| Bank overdraft |
9,914,895 | |||
| Cash received as collateral for OTC derivatives |
7,140,000 | |||
| Payables: |
||||
| Administration fees |
43,790 | |||
| Capital shares redeemed |
10,527,840 | |||
| Investment advisory fees |
384,901 | |||
| Trustees’ and Officer’s fees |
8,187 | |||
| Other affiliates |
34,803 | |||
| Service and distribution fees |
54,428 | |||
| To the Manager |
529 | |||
| Variation margin on futures contracts |
11,564,815 | |||
| Other accrued expenses |
659,699 | |||
| Unrealized depreciation on: |
||||
| Forward foreign currency exchange contracts |
21,516,612 | |||
| OTC swaps |
6,076,427 | |||
|
|
|
|||
| Total liabilities |
67,926,926 | |||
|
|
|
|||
| NET ASSETS |
$ | 875,400,080 | ||
|
|
|
|||
| NET ASSETS CONSIST OF |
||||
| Paid-in capital |
$ | 911,140,521 | ||
| Accumulated loss |
(35,740,441) | |||
|
|
|
|||
| NET ASSETS |
$ | 875,400,080 | ||
|
|
|
|||
| NET ASSET VALUE |
||||
| Institutional — Based on net assets of $289,126,693 and 21,269,357 shares outstanding, unlimited number of shares authorized, $0.001 par value |
$ | 13.59 | ||
|
|
|
|||
| Service — Based on net assets of $835,948 and 61,718 shares outstanding, unlimited number of shares authorized, $0.001 par value |
$ | 13.54 | ||
|
|
|
|||
| Investor A — Based on net assets of $208,745,678 and 15,479,087 shares outstanding, unlimited number of shares authorized, $0.001 par value |
$ | 13.49 | ||
|
|
|
|||
| Investor C — Based on net assets of $13,186,774 and 1,004,114 shares outstanding, unlimited number of shares authorized, $0.001 par value |
$ | 13.13 | ||
|
|
|
|||
| Class K — Based on net assets of $363,504,987 and 26,794,945 shares outstanding, unlimited number of shares authorized, $0.001 par value |
$ | 13.57 | ||
|
|
|
|||
See notes to financial statements.
| 30 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| BlackRock Tactical Opportunities Fund |
||||||||
| Period from 10/01/2019 to 04/30/2020 |
Year Ended September 30, |
|||||||
|
|
||||||||
| INVESTMENT INCOME |
||||||||
| Dividends — affiliated |
$ | 312,986 | $ | 1,060,618 | ||||
| Dividends — unaffiliated |
6,858,069 | 13,522,874 | ||||||
| Interest — unaffiliated |
1,606,358 | 3,070,464 | ||||||
| Securities lending income — affiliated — net |
1,364 | 39,654 | ||||||
| Foreign taxes withheld |
(181,714) | (686,243) | ||||||
|
|
|
|||||||
| Total investment income |
8,597,063 | 17,007,367 | ||||||
|
|
|
|||||||
| EXPENSES |
||||||||
| Investment advisory |
2,885,793 | 4,359,757 | ||||||
| Transfer agent — class specific |
473,596 | 716,610 | ||||||
| Service and distribution — class specific |
401,196 | 790,049 | ||||||
| Administration |
217,151 | 329,577 | ||||||
| Custodian |
159,785 | 121,971 | ||||||
| Professional |
119,686 | 83,575 | ||||||
| Registration |
116,924 | 77,748 | ||||||
| Administration — class specific |
104,933 | 158,524 | ||||||
| Accounting services |
84,244 | 127,566 | ||||||
| Printing |
68,256 | 46,619 | ||||||
| Trustees and Officer |
14,661 | 18,284 | ||||||
| Recoupment of past waived and/or reimbursed fees — class specific |
— | 17,055 | ||||||
| Board realignment and consolidation |
— | 9,741 | ||||||
| Recoupment of past waived and/or reimbursed fees |
— | 5,695 | ||||||
| Miscellaneous |
69,905 | 21,683 | ||||||
|
|
|
|||||||
| Total expenses |
4,716,130 | 6,884,454 | ||||||
| Less: |
||||||||
| Administration fees waived — class specific |
(8,935) | — | ||||||
| Fees waived and/or reimbursed by the Manager |
(20,927) | (41,067) | ||||||
| Transfer agent fees waived and/or reimbursed — class specific |
(18) | — | ||||||
|
|
|
|||||||
| Total expenses after fees waived and/or reimbursed |
4,686,250 | 6,843,387 | ||||||
|
|
|
|||||||
| Net investment income |
$ | 3,910,813 | $ | 10,163,980 | ||||
|
|
|
|||||||
| FINANCIAL STATEMENTS | 31 |
Statements of Operations (continued)
| BlackRock Tactical Opportunities Fund |
||||||||
| Period from 10/01/2019 to 04/30/2020 |
Year Ended September |
|||||||
|
|
||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||
| Net realized gain (loss) from: |
||||||||
| Investments — affiliated |
$ | (46) | $ | (400) | ||||
| Investments — unaffiliated |
(46,761,448) | (9,589,412) | ||||||
| Capital gain distributions from investment companies — affiliated |
70 | — | ||||||
| Forward foreign currency exchange contracts |
(8,998,610) | (13,670,015) | ||||||
| Foreign currency transactions |
(5,324,802) | (630,355) | ||||||
| Futures contracts |
66,566,235 | (12,695,266) | ||||||
| Swaps |
46,314,153 | (5,385,365) | ||||||
|
|
|
|||||||
| 51,795,552 | (41,970,813) | |||||||
|
|
|
|||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||
| Investments — unaffiliated |
29,684,453 | 481,914 | ||||||
| Forward foreign currency exchange contracts |
(5,911,927) | (1,360,805) | ||||||
| Foreign currency translations |
598,117 | (188,737) | ||||||
| Futures contracts |
(59,216,783) | 7,065,754 | ||||||
| Swaps |
2,213,918 | 3,903,177 | ||||||
|
|
|
|||||||
| (32,632,222) | 9,901,303 | |||||||
|
|
|
|||||||
| Net realized and unrealized gain (loss) |
19,163,330 | (32,069,510) | ||||||
|
|
|
|||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 23,074,143 | $ | (21,905,530) | ||||
|
|
|
|||||||
See notes to financial statements.
| 32 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets
| BlackRock Tactical Opportunities Fund | ||||||||||||||||
| Period from 10/01/2019 to 04/30/2020 |
Year Ended September 30, | |||||||||||||||
| 2019 | 2018 | |||||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||
| OPERATIONS |
||||||||||||||||
| Net investment income |
$ | 3,910,813 | $ | 10,163,980 | $ | 5,360,807 | ||||||||||
| Net realized gain (loss) |
51,795,552 | (41,970,813 | ) | 53,833,470 | ||||||||||||
| Net change in unrealized appreciation (depreciation) |
(32,632,222 | ) | 9,901,303 | 4,522,696 | ||||||||||||
|
|
|
|||||||||||||||
| Net increase (decrease) in net assets resulting from operations |
23,074,143 | (21,905,530 | ) | 63,716,973 | ||||||||||||
|
|
|
|||||||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS(a) |
||||||||||||||||
| Institutional |
(9,664,467 | ) | (17,643,157 | ) | (1,569,603 | ) | ||||||||||
| Service |
(19,846 | ) | (82,582 | ) | (6,689 | ) | ||||||||||
| Investor A |
(6,407,099 | ) | (21,588,975 | ) | (1,907,243 | ) | ||||||||||
| Investor B |
— | — | (503 | ) | ||||||||||||
| Investor C |
(360,507 | ) | (1,630,883 | ) | (218,265 | ) | ||||||||||
| Class K |
(13,048,106 | ) | (17,911,034 | ) | (1,723,712 | ) | ||||||||||
|
|
|
|||||||||||||||
| Decrease in net assets resulting from distributions to shareholders |
(29,500,025 | ) | (58,856,631 | ) | (5,426,015 | ) | ||||||||||
|
|
|
|||||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||
| Net increase (decrease) in net assets derived from capital share transactions |
(12,259,692 | ) | 286,355,465 | 22,578,212 | ||||||||||||
|
|
|
|||||||||||||||
| NET ASSETS |
||||||||||||||||
| Total increase (decrease) in net assets |
(18,685,574 | ) | 205,593,304 | 80,869,170 | ||||||||||||
| Beginning of period |
894,085,654 | 688,492,350 | 607,623,180 | |||||||||||||
|
|
|
|||||||||||||||
| End of period |
$ | 875,400,080 | $ | 894,085,654 | $ | 688,492,350 | ||||||||||
|
|
|
|||||||||||||||
| (a) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
See notes to financial statements.
| FINANCIAL STATEMENTS | 33 |
(For a share outstanding throughout each period)
| BlackRock Tactical Opportunities Fund | ||||||||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||||||||
| Period from 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.67 | $ | 15.44 | $ | 14.11 | $ | 13.41 | $ | 14.20 | $ | 15.52 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income(a) |
0.06 | 0.19 | 0.14 | 0.09 | 0.07 | 0.06 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.32 | (0.57 | ) | 1.31 | 0.82 | (0.16 | ) | (0.23 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net increase (decrease) from investment operations |
0.38 | (0.38 | ) | 1.45 | 0.91 | (0.09 | ) | (0.17 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||||||
| From net investment income |
(0.46 | ) | (0.55 | ) | (0.12 | ) | (0.23 | ) | (0.51 | ) | (0.35 | ) | ||||||||||||||||
| From net realized gain |
— | (0.84 | ) | — | — | (0.19 | ) | (0.80 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total distributions |
(0.46 | ) | (1.39 | ) | (0.12 | ) | (0.23 | ) | (0.70 | ) | (1.15 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Capital Contribution |
— | — | — | 0.02 | — | — | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net asset value, end of period |
$ | 13.59 | $ | 13.67 | $ | 15.44 | $ | 14.11 | $ | 13.41 | $ | 14.20 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||||||
| Based on net asset value |
2.79%(d) | (2.43)% | 10.36% | 7.05% | (0.71)% | (1.27)% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Ratios to Average Net Assets(e) |
||||||||||||||||||||||||||||
| Total expenses(f) |
0.86%(g) | 0.80% | 0.93% | 0.92% | 0.91% | 0.84% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
0.85%(g) | 0.79% | 0.89% | 0.89% | 0.87% | 0.81% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income |
0.77%(g) | 1.36% | 0.94% | 0.65% | 0.49% | 0.40% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 289,127 | $ | 290,851 | $ | 220,711 | $ | 189,242 | $ | 271,623 | $ | 265,521 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Portfolio turnover rate |
167% | 288% | 265% | 257% | 359% | 295% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, assumes the reinvestment of distributions. |
| (d) | Aggregate total return. |
| (e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Investments in underlying funds |
0.01% | 0.01% | 0.01% | 0.01% | 0.05% | 0.08% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (f) | Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows: |
| Period from |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Expense ratios |
N/A | 0.79% | N/A | N/A | N/A | 0.84% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (g) | Annualized. |
See notes to financial statements.
| 34 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| BlackRock Tactical Opportunities Fund | ||||||||||||||||||||||||||||
| Service | ||||||||||||||||||||||||||||
| Period from 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.56 | $ | 15.33 | $ | 14.02 | $ | 13.34 | $ | 14.12 | $ | 15.44 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income(a) |
0.04 | 0.16 | 0.10 | 0.05 | 0.02 | 0.01 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.31 | (0.58 | ) | 1.32 | 0.81 | (0.14 | ) | (0.23 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net increase (decrease) from investment operations |
0.35 | (0.42 | ) | 1.42 | 0.86 | (0.12 | ) | (0.22 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||||||
| From net investment income |
(0.37 | ) | (0.51 | ) | (0.11 | ) | (0.20 | ) | (0.47 | ) | (0.30 | ) | ||||||||||||||||
| From net realized gain |
— | (0.84 | ) | — | — | (0.19 | ) | (0.80 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total distributions |
(0.37 | ) | (1.35 | ) | (0.11 | ) | (0.20 | ) | (0.66 | ) | (1.10 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Capital Contribution |
— | — | — | 0.02 | — | — | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net asset value, end of period |
$ | 13.54 | $ | 13.56 | $ | 15.33 | $ | 14.02 | $ | 13.34 | $ | 14.12 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||||||
| Based on net asset value |
2.63%(d) | (2.74)% | 10.21% | 6.66% | (0.95)% | (1.58)% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Ratios to Average Net Assets(e) |
||||||||||||||||||||||||||||
| Total expenses(f) |
1.16%(g) | 1.06% | 1.22% | 1.23% | 1.24% | 1.21% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
1.14%(g) | 1.06% | 1.16% | 1.17% | 1.17% | 1.17% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income |
0.53%(g) | 1.14% | 0.65% | 0.38% | 0.17% | 0.05% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 836 | $ | 767 | $ | 832 | $ | 828 | $ | 1,667 | $ | 1,703 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Portfolio turnover rate |
167% | 288% | 265% | 257% | 359% | 295% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, assumes the reinvestment of distributions. |
| (d) | Aggregate total return. |
| (e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Investments in underlying funds |
0.01% | 0.01% | 0.01% | 0.01% | 0.05% | 0.08% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (f) | Includes recoupment of past waived and/or reimbursed fees. Excluding the recoupment of past waived and/or reimbursed fees, the expense ratios were as follows: |
| Period from |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Expense ratios |
N/A | 1.04% | N/A | N/A | 1.23% | 1.17% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (g) | Annualized. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS | 35 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| BlackRock Tactical Opportunities Fund | ||||||||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||||||||
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.54 | $ | 15.31 | $ | 14.02 | $ | 13.33 | $ | 14.12 | $ | 15.43 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income(a) |
0.04 | 0.14 | 0.09 | 0.05 | 0.02 | 0.02 | ||||||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.32 | (0.56 | ) | 1.31 | 0.81 | (0.15 | ) | (0.22 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net increase (decrease) from investment operations |
0.36 | (0.42 | ) | 1.40 | 0.86 | (0.13 | ) | (0.20 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||||||
| From net investment income |
(0.41 | ) | (0.51 | ) | (0.11 | ) | (0.19 | ) | (0.47 | ) | (0.31 | ) | ||||||||||||||||
| From net realized gain |
— | (0.84 | ) | — | — | (0.19 | ) | (0.80 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total distributions |
(0.41 | ) | (1.35 | ) | (0.11 | ) | (0.19 | ) | (0.66 | ) | (1.11 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Capital Contribution |
— | — | — | 0.02 | — | — | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net asset value, end of period |
$ | 13.49 | $ | 13.54 | $ | 15.31 | $ | 14.02 | $ | 13.33 | $ | 14.12 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||||||
| Based on net asset value |
2.70%(d) | (2.77)% | 10.06% | 6.66% | (1.02)% | (1.48)% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Ratios to Average Net Assets(e) |
||||||||||||||||||||||||||||
| Total expenses |
1.15%(f) | 1.10%(g) | 1.21% | 1.20%(g) | 1.21% | 1.14% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
1.14%(f) | 1.09% | 1.20% | 1.20% | 1.18% | 1.11% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income |
0.48%(f) | 1.01% | 0.61% | 0.37% | 0.15% | 0.11% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 208,746 | $ | 218,634 | $ | 237,442 | $ | 244,101 | $ | 271,941 | $ | 308,570 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Portfolio turnover rate |
167% | 288% | 265% | 257% | 359% | 295% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions. |
| (d) | Aggregate total return. |
| (e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Investments in underlying funds |
0.01% | 0.01% | 0.01% | 0.01% | 0.05% | 0.08% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (f) | Annualized. |
| (g) | Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios. |
See notes to financial statements.
| 36 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| BlackRock Tactical Opportunities Fund | ||||||||||||||||||||||||||||
| Investor C | ||||||||||||||||||||||||||||
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.14 | $ | 14.81 | $ | 13.64 | $ | 12.95 | $ | 13.73 | $ | 15.06 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income (loss)(a) |
(0.02 | ) | 0.04 | (0.01 | ) | (0.05 | ) | (0.07 | ) | (0.08 | ) | |||||||||||||||||
| Net realized and unrealized gain (loss) |
0.31 | (0.54 | ) | 1.27 | 0.80 | (0.15 | ) | (0.22 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net increase (decrease) from investment operations |
0.29 | (0.50 | ) | 1.26 | 0.75 | (0.22 | ) | (0.30 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||||||
| From net investment income |
(0.30 | ) | (0.33 | ) | (0.09 | ) | (0.08 | ) | (0.37 | ) | (0.23 | ) | ||||||||||||||||
| From net realized gain |
— | (0.84 | ) | — | — | (0.19 | ) | (0.80 | ) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total distributions |
(0.30 | ) | (1.17 | ) | (0.09 | ) | (0.08 | ) | (0.56 | ) | (1.03 | ) | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Capital Contribution |
— | — | — | 0.02 | — | — | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net asset value, end of period |
$ | 13.13 | $ | 13.14 | $ | 14.81 | $ | 13.64 | 12.95 | $ | 13.73 | |||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||||||
| Based on net asset value |
2.21%(d) | (3.45)% | 9.27% | 5.99% | (1.70)% | (2.20)% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Ratios to Average Net Assets(e) |
||||||||||||||||||||||||||||
| Total expenses |
1.86%(f) | 1.82%(g) | 1.89% | 1.89% | 1.90% | 1.82% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
1.85%(f) | 1.81% | 1.88% | 1.89% | 1.87% | 1.79% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Net investment income (loss) |
(0.24)%(f) | 0.26% | (0.08)% | (0.34)% | (0.54)% | (0.57)% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 13,187 | $ | 17,171 | $ | 31,022 | $ | 35,343 | $ | 54,050 | $ | 65,728 | ||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| Portfolio turnover rate |
167% | 288% | 265% | 257% | 359% | 295% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions. |
| (d) | Aggregate total return. |
| (e) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | |||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||||||||||
| Investments in underlying funds |
0.01% | 0.01% | 0.01% | 0.01% | 0.05% | 0.08% | ||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||
| (f) | Annualized. |
| (g) | Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios. |
See notes to financial statements.
| FINANCIAL HIGHLIGHTS | 37 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| BlackRock Tactical Opportunities Fund | ||||||||||||||||||||||||
| Class K | ||||||||||||||||||||||||
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | Period from 08/01/16 (a) to 09/30/16 |
||||||||||||||||||||||
| 2019 | 2018 | 2017 | ||||||||||||||||||||||
| Net asset value, beginning of period |
$ | 13.65 | $ | 15.43 | $ | 14.08 | $ | 13.42 | $ | 13.41 | ||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net investment income(b) |
0.07 | 0.21 | 0.16 | 0.13 | 0.03 | |||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.32 | (0.57 | ) | 1.32 | 0.79 | (0.02 | ) | |||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net increase (decrease) from investment operations |
0.39 | (0.36 | ) | 1.48 | 0.92 | 0.01 | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Distributions(c) |
||||||||||||||||||||||||
| From net investment income |
(0.47 | ) | (0.58 | ) | (0.13 | ) | (0.26 | ) | — | |||||||||||||||
| From net realized gain |
— | (0.84 | ) | — | — | — | ||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total distributions |
(0.47 | ) | (1.42 | ) | (0.13 | ) | (0.26 | ) | — | |||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net asset value, end of period |
$ | 13.57 | $ | 13.65 | $ | 15.43 | $ | 14.08 | $ | 13.42 | ||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total Return(d) |
||||||||||||||||||||||||
| Based on net asset value |
2.93%(e) | (2.34)% | 10.57% | 6.93% | 0.07%(e) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Ratios to Average Net Assets(f) |
||||||||||||||||||||||||
| Total expenses |
0.72%(g) | 0.67%(h) | 0.76% | 0.77% | 0.78%(g)(h) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Total expenses after fees waived and/or reimbursed and paid indirectly |
0.72%(g) | 0.67% | 0.75% | 0.77% | 0.75%(g) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Net investment income |
0.91%(g) | 1.51% | 1.09% | 0.94% | 1.20%(g) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 363,505 | $ | 366,664 | $ | 198,487 | $ | 138,018 | $ | 200 | ||||||||||||||
|
|
|
|||||||||||||||||||||||
| Portfolio turnover rate |
167% | 288% | 265% | 257% | 359%(i) | |||||||||||||||||||
|
|
|
|||||||||||||||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Where applicable, assumes the reinvestment of distributions. |
| (e) | Aggregate total return. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Period from 10/01/19 to 04/30/20 |
Year Ended September 30, | Period from 08/01/16 (a) to 09/30/16 |
||||||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||
| Investments in underlying funds |
0.01% | 0.01% | 0.01% | 0.01% | 0.05% | |||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||
| (g) | Annualized. |
| (h) | Includes recoupment of past waived and/or reimbursed fees with no financial impact to the expense ratios. |
| (i) | Portfolio turnover rate is representative of the Fund for the entire year. |
See notes to financial statements.
| 38 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| 1. | ORGANIZATION |
BlackRock FundsSM (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock Tactical Opportunities Fund (the “Fund”) is a series of the Trust. The Fund is classified as diversified.
The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional, Service and Class K Shares are sold only to certain eligible investors. Service, Investor A and Investor C Shares bear certain expenses related to shareholder servicing of such shares, and Investor C Shares also bear certain expenses related to the distribution of such shares. Investor A and Investor C Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor C shareholders may vote on material changes to the Investor A Shares distribution and service plan).
| Share Class |
Initial Sales Charge | CDSC | Conversion Privilege | |||||||||
| Institutional, Service and Class K Shares |
No | No | None | |||||||||
| Investor A Shares |
Yes | No | (a) | |
None |
| ||||||
| Investor C Shares |
No | Yes | (b) | |
To Investor A Shares after approximately 10 years |
| ||||||
| (a) | Investor A Shares may be subject to a contingent deferred sales charge (“CDSC”) for certain redemptions where no initial sales charge was paid at the time of purchase. |
| (b) | A CDSC of 1.00% is assessed on certain redemptions of lnvestor C Shares made within one year after purchase. |
On November 13, 2019, the Board of Trustees of the Trust (the “Board”) approved a change in the fiscal year-end of the Fund, effective as of April 30, 2020, from September 30 to April 30.
The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of equity, multi-asset, index and money market funds referred to as the BlackRock Multi-Asset Complex.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
Foreign Currency Translation: The Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.
The Fund does not isolate the portion of the results of operations arising as a result of changes in the exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.
Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., futures contracts, forward foreign currency exchange contracts and swaps) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Distributions: Distributions paid by the Fund are recorded on the ex-dividend date. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.
Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.
| NOTES TO FINANCIAL STATEMENTS | 39 |
Notes to Financial Statements (continued)
Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.
| 3. | INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS |
Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the NYSE (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board. If a security’s market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:
| • | Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. |
| Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Fund’s net assets. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets. |
| • | Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value. |
| • | Investments in open-end U.S. mutual funds are valued at net asset value (“NAV”) each business day. |
| • | Futures contracts traded on exchanges are valued at their last sale price. |
| • | Forward foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of trading on the NYSE based on that day’s prevailing forward exchange rate for the underlying currencies. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available. |
| • | Swap agreements are valued utilizing quotes received daily by the Fund’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. |
If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or in the event that the application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
| 40 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by the Global Valuation Committee and third party pricing services utilize one or a combination of, but not limited to, the following inputs.
| Standard Inputs Generally Considered By Third Party Pricing Services | ||
| Market approach |
(i) recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii) recapitalizations and other transactions across the capital structure; and (iii) market multiples of comparable issuers. | |
| Income approach |
(i) future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii) quoted prices for similar investments or assets in active markets; and (iii) other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. | |
| Cost approach |
(i) audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii) changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii) relevant news and other public sources; and (iv) known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company. |
Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.
The Private Companies are not subject to the public company disclosure, timing, and reporting standards as other investments held by the Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Fund could receive upon the sale of the investment.
Fair Value Hierarchy: Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial statement purposes as follows:
| • | Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access |
| • | Level 2 — Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| • | Level 3 — Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committee’s assumptions used in determining the fair value of investments and derivative financial instruments) |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies. There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.
| 4. | SECURITIES AND OTHER INVESTMENTS |
Asset-Backed and Mortgage-Backed Securities: Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, a fund may subsequently have to reinvest the proceeds at lower interest rates. If a fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
For mortgage pass-through securities (the “Mortgage Assets”) there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities
| NOTES TO FINANCIAL STATEMENTS | 41 |
Notes to Financial Statements (continued)
issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury.
Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Collateralized Debt Obligations: Collateralized debt obligations (“CDOs”), including collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”), are types of asset-backed securities. A CDO is an entity that is backed by a diversified pool of debt securities (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches,” which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.
Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The market value of any securities on loan, all of which were classified as common stocks in the Fund’s Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value — unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.
Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned to the extent the collateral received does not cover the value on the securities loaned in the event of borrower default. The Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. Such losses are borne entirely by the Fund.
| 5. | DERIVATIVE FINANCIAL INSTRUMENTS |
The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount
| 42 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
on the settlement date. Upon entering into a futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statement of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest, foreign currency exchange rates or underlying assets.
Forward Foreign Currency Exchange Contracts: Forward foreign currency exchange contracts are entered into to gain or reduce exposure to foreign currencies (foreign currency exchange rate risk).
A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a specified date. These contracts help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated and in some cases, may be used to obtain exposure to a particular market.
The contract is marked-to-market daily and the change in market value is recorded as unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the value at the time it was opened and the value at the time it was closed. Non-deliverable forward foreign currency exchange contracts are settled with the counterparty in cash without the delivery of foreign currency. The use of forward foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies, and such value may exceed the amount(s) reflected in the Statement of Assets and Liabilities. Cash amounts pledged for forward foreign currency exchange contracts are considered restricted and are included in cash pledged as collateral for OTC derivatives in the Statement of Assets and Liabilities.
Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).
For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.
In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Fund agrees to receive from or pay to the broker a variation margin. Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gains (losses) in the Statements of Operations.
| • | Total return swaps — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one security or market (e.g., fixed-income) with another security or market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk). |
Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument, or basket of underlying instruments, in exchange for fixed or floating rate interest payments. If the total return of the instrument(s) or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Fund receives payment from or makes a payment to the counterparty.
| • | Interest rate swaps — Interest rate swaps are entered into to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate (interest rate risk). |
Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, in exchange for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex interest rate swaps, the notional principal amount may decline (or amortize) over time.
| • | Forward swaps — The Fund enters into forward interest rate swaps and forward total return swaps. In a forward swap, the Fund and the counterparty agree to make periodic net payments beginning on a specified date or a net payment at termination. |
Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.
| NOTES TO FINANCIAL STATEMENTS | 43 |
Notes to Financial Statements (continued)
Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may restrictor prohibit the right of offset in bankruptcy, insolvency or other events.
Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.
Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately in the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Fund generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterparty non-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.
For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.
| 6. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.
For such services, the Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of the Fund’s net assets:
| Average Daily Net Assets | Investment Advisory Fees |
|||
| First $1 Billion |
0.550 | % | ||
| $1 Billion — $2 Billion |
0.500 | |||
| $ 2Billion — $3Billion |
0.475 | |||
| Greater than $3 Billion |
0.450 | |||
With respect to the Fund, the Manager entered into sub-advisory agreements with BlackRock Asset Management North Asia Limited (“BAMNA”) and BlackRock (Singapore) Limited (“BRS”) (collectively, the “Sub-Advisers”), each an affiliate of the Manager. The Manager pays BAMNA and BRS for services they provide for that portion of the Fund for which BAMNA and BRS, as applicable, acts as sub-adviser, a monthly fee that is equal to a percentage of the investment advisory fees paid by the Fund to the Manager.
Service and Distribution Fees: The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:
| Service Fees | Distribution Fees | |||||||
| Service |
0.25 | % | — | % | ||||
| Investor A |
0.25 | — | ||||||
| Investor C |
0.25 | 0.75 | ||||||
BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to shareholders.
For the period ended April 30, 2020 and the year ended September 30, 2019, the following table shows the class specific service and distribution fees borne directly by each share class of the Fund:
| Service and Distribution Fees |
Period from 10/01/19 |
Year Ended 09/30/19 |
||||||
| Service |
$ | 1,159 | $ | 3,415 | ||||
| Investor A |
310,013 | 580,738 | ||||||
| Investor C |
90,024 | 205,896 | ||||||
| $ | 401,196 | $ | 790,049 | |||||
| 44 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager receives an administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of the Fund. The administration fee, which is shown as administration in the Statements of Operations, is paid at the annual rates below.
| Average Daily Net Assets | Administration Fees | |||
| First $500 Million |
0.0425 | % | ||
| $500 Million — $1 Billion |
0.0400 | |||
| $1 Billion — $2 Billion |
0.0375 | |||
| $2 Billion — $4 Billion |
0.0350 | |||
| $4 Billion — $13 Billion |
0.0325 | |||
| Greater than $13 Billion |
0.0300 | |||
In addition, the Manager charges each of the share classes an administration fee, which is shown as administration — class specific in the Statements of Operations, at an annual rate of 0.02% of the average daily net assets of each respective class.
For the period ended April 30, 2020 and the year ended September 30, 2019, the Fund paid the following to the Manager in return for these services, which are included in administration – class specific in the Statements of Operations:
| Period from 10/01/19 |
Year Ended 09/30/19 |
|||||||
| Institutional |
$ | 33,814 | $ | 50,647 | ||||
| Service |
93 | 273 | ||||||
| Investor A |
24,770 | 46,455 | ||||||
| Investor C |
1,798 | 4,118 | ||||||
| Class K |
44,458 | 57,031 | ||||||
| $ | 104,933 | $ | 158,524 | |||||
Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Fund with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to servicing of underlying investor accounts. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the period ended April 30, 2020 and the year ended September 30, 2019, the Fund paid the following amounts to affiliates of BlackRock in return for these services, which are included in transfer agent — class specific in the Statements of Operations:
| Period from 10/01/19 |
Year Ended 09/30/19 |
|||||||
| Institutional |
$ | 118,598 | $ | 256,947 | ||||
| Service |
216 | 422 | ||||||
| Investor A |
88 | 310 | ||||||
| $ | 118,902 | $ | 257,679 | |||||
The Manager maintains a call center that is responsible for providing certain shareholder services to the Fund. Shareholder services include responding to inquiries and processing purchases and sales based upon instructions from shareholders. For the period ended April 30, 2020 and the year ended September 30, 2019, the Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:
| Period from 10/01/19 |
Year Ended 09/30/19 |
|||||||
| Institutional |
$ | 616 | $ | 1,144 | ||||
| Service |
37 | 104 | ||||||
| Investor A |
31,085 | 60,627 | ||||||
| Investor C |
798 | 2,202 | ||||||
| Class K |
435 | 464 | ||||||
| $ | 32,971 | $ | 64,541 | |||||
| NOTES TO FINANCIAL STATEMENTS | 45 |
Notes to Financial Statements (continued)
For the period ended April 30, 2020 and the year ended September 30, 2019, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:
| Period from 10/01/19 to 04/30/20 |
Year Ended 09/30/19 |
|||||||
| Institutional |
$ | 240,150 | $ | 296,276 | ||||
| Service |
885 | 1,656 | ||||||
| Investor A |
219,462 | 390,505 | ||||||
| Investor C |
12,429 | 27,366 | ||||||
| Class K |
670 | 807 | ||||||
| $ | 473,596 | $ | 716,610 | |||||
Other Fees: For the period ended April 30, 2020 and the year ended September 30, 2019, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares of $2,787 and $9,740, respectively.
For the period ended April 30, 2020 and the year ended September 30, 2019, affiliates received CDSCs as follows:
| Period from 10/01/19 to 04/30/20 |
Year Ended 09/30/19 |
|||||||
| Investor A |
$ | 3,351 | $ | 8 | ||||
| Investor C |
3,104 | 1,052 | ||||||
Expense Limitations, Waivers, Reimbursements and Recoupments: The Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through January 31, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of the trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Fund. The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation described below will be reduced by the amount of the affiliated money market fund waiver. Prior to January 28, 2020, this waiver was voluntary. This amount is included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the period ended April 30, 2020 and the year ended September 30, 2019, the amounts waived were $20,927 and $34,446, respectively.
The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through January 31, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of Independent Trustees, or by a vote of a majority of the outstanding voting securities of the Fund. For the period ended April 30, 2020, there were no fees waived and/or reimbursed by the Manager pursuant to this arrangement.
The Fund has incurred expenses in connection with the realignment and consolidation of the boards of trustees of certain BlackRock-advised funds. The Manager has voluntarily agreed to reimburse the Fund for all or a portion of such expenses, which amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the period ended April 30, 2020 and the year ended September 30, 2019, the amounts reimbursed were $0 and $6,621, respectively.
The Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:
| Institutional |
0.89 | % | ||
| Service |
1.17 | |||
| Investor A |
1.37 | |||
| Investor C |
2.14 | |||
| Class K |
0.84 |
The Manager has agreed not to reduce or discontinue these contractual expense limitations through January 31, 2021, unless approved by the Board, including a majority of Independent Trustees, or by a vote of a majority of the outstanding voting securities of the Fund. For the period ended April 30, 2020 and the year ended September 30, 2019, there were no fees waived and/or reimbursed by the Manager.
These amounts waived and/or reimbursed are included in administration fees waived — class specific and transfer agent fees waived and/or reimbursed — class specific, respectively, in the Statements of Operations. For the period ended April 30, 2020 and the year ended September 30, 2019, class specific expense waivers and/or reimbursements are as follows:
|
|
||||||||
| Administration Fees Waived | Period from 10/01/19 to 04/30/20 |
Year Ended 09/30/19 |
||||||
|
|
||||||||
| Institutional |
$ | 8,873 | $ | — | ||||
| Service |
62 | — | ||||||
|
|
||||||||
| $ | 8,935 | $ | — | |||||
|
|
||||||||
| 46 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| Transfer Agent Fees Waived and/or Reimbursed | Period from 10/01/19 to 04/30/20 |
Year Ended 09/30/19 |
||||||
| Service |
$ | 18 | $ | — | ||||
With respect to the contractual expense limitation, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:
(1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and
(2) the Manager or an affiliate continues to serve as the Fund’s investment adviser or administrator.
This repayment applies only to the contractual expense limitation on net expenses and does not apply to the contractual investment advisory fee waiver described above or any voluntary waivers that may be in effect from time to time. Effective December 1, 2019, the repayment arrangement between the Fund and the Manager pursuant to which such Fund may be required to repay amounts waived and/or reimbursed under the Fund’s contractual caps on net expenses was terminated.
For the year ended September 30, 2019, the Manager recouped the following fund level and class specific waivers and/or reimbursements previously recorded by the Fund:
| Fund level |
$ | 5,695 | ||
| Institutional |
16,046 | |||
| Service |
256 | |||
| Investor A |
753 | |||
| $ | 22,750 |
The following fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by the Manager, expired on December 1, 2019:
| Institutional |
$ | 67,144 | ||
| Service |
432 |
Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment adviser to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund. The private investment company in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds.
Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.
Pursuant to the current securities lending agreement, the Fund retains 75% of securities lending income (which excludes collateral investment expenses), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.
In addition, commencing the business day following the date that the aggregate securities lending income earned across the BlackRock Multi-Asset Complex in a calendar year exceeds a specified threshold, the Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 80% of securities lending income (which excludes collateral investment expenses), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.
Prior to January 1, 2020, the Fund retained 82% of securities lending income (which excluded collateral investment expenses) and the amount retained could never be less than 70% of the total of securities lending income plus the collateral investment expenses. In addition, commencing the business day following the date that the aggregate securities lending income earned across the BlackRock Multi-Asset Complex in a calendar year exceeded a specified threshold, the Fund would retain for the remainder of that calendar year 85% of securities lending income (which excluded collateral investment expenses), and the amount retained could never be less than 70% of the total of securities lending income plus the collateral investment expenses.
The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statements of Operations. For the period ended April 30, 2020 and the year ended September 30, 2019, the Fund paid BIM $215 and $8,697, respectively, for securities lending agent services.
Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow under the Interfund Lending Program.
| NOTES TO FINANCIAL STATEMENTS | 47 |
Notes to Financial Statements (continued)
A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.
During the period ended April 30, 2020, the Fund did not participate in the Interfund Lending Program.
Trustees and Officers: Certain trustees and/or officers of the Trust are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Fund’s Chief Compliance Officer, which is included in Trustees and Officer in the Statements of Operations.
| 7. | PURCHASES AND SALES |
For the period ended April 30, 2020, purchases and sales of investments, including paydowns and excluding short-term securities, were as follows:
| Purchases | Sales | |||||||
| Non-U.S. Government Securities |
$ | 1,093,863,425 | $ | 1,151,319,397 | ||||
| U.S. Government Securities |
101,986,106 | 64,372,108 | ||||||
| 8. | INCOME TAX INFORMATION |
It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for the period ended April 30, 2020 and each of the four years ended September 30, 2019. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Fund as of April 30, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.
The tax character of distributions paid was as follows:
| 04/30/20 | 09/30/19 | 09/30/18 | ||||||||||
| Ordinary income |
$ | 29,500,025 | $ | 40,956,921 | $ | 5,426,015 | ||||||
| Long-term capital gains |
— | 17,899,710 | — | |||||||||
|
|
|
|||||||||||
| $ | 29,500,025 | $ | 58,856,631 | $ | 5,426,015 | |||||||
|
|
|
|||||||||||
As of period end, the tax components of accumulated loss were as follows:
|
|
||||
| Non-expiring capital loss carryforwards (a) |
$ | (16,250,551 | ) | |
| Net unrealized gains (b) |
1,626,836 | |||
| Qualified late-year losses (c) |
(21,116,726 | ) | ||
|
|
|
|||
| $ | (35,740,441 | ) | ||
|
|
|
|||
| (a) | Amounts available to offset future realized capital gains. |
| (b) | The difference between book-basis and tax-basis net unrealized gains/losses was attributable primarily to amortization and accretion methods of premiums and discounts on fixed income securities, the tax deferral of losses on wash sales and straddles, the realization for tax purposes of unrealized gains/losses on certain futures and foreign currency contracts and the realization for tax purposes of unrealized gain on investment in passive foreign investment companies. |
| (c) | The Fund has elected to defer certain qualified late-year losses and recognize such losses in next taxable year. |
As of April 30, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
|
|
||||
| Tax cost |
$ | 699,230,970 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 140,750,806 | ||
| Gross unrealized depreciation |
(105,252,775 | ) | ||
|
|
|
|||
| Net unrealized appreciation |
$ | 35,498,031 | ||
|
|
|
|||
| 48 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| 9. | BANK BORROWINGS |
BlackRock FundsSM, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds“), is a party to a 364-day, $2.25 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.75 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2021 unless extended or renewed. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the period ended April 30, 2020, the Fund did not borrow under the credit agreement.
| 10. | PRINCIPAL RISKS |
In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Fund and its investments. The Fund’s prospectus provides details of the risks to which the Fund is subject.
The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below the Fund portfolio’s current earnings rate.
The Fund may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00, which may be subject to redemption gates or liquidity fees under certain circumstances.
Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments. An illiquid investment is any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund may experience difficulty in selling illiquid investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.
The price the Fund could receive upon the sale of any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.
An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a fund’s investments. The impact of the pandemic may be short term or may last for an extended period of time.
Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.
With exchange-traded futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event
| NOTES TO FINANCIAL STATEMENTS | 49 |
| Notes to Financial Statements (continued) |
of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.
Concentration Risk: The Fund invests a significant portion of its assets in fixed-income securities and/or uses derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Fund may be subject to a greater risk of rising interest rates due to the current period of historically low rates.
| 11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| Period from 10/01/19 to 04/30/20 |
Year Ended 09/30/19 |
Year Ended 09/30/18 |
||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||
| Institutional |
||||||||||||||||||||||||
| Shares sold |
2,118,223 | $ | 28,703,077 | 11,584,617 | $ | 161,248,704 | 5,930,824 | $ | 88,216,243 | |||||||||||||||
| Shares issued in reinvestment of distributions |
666,864 | 8,955,978 | 1,138,641 | 15,531,064 | 92,039 | 1,335,481 | ||||||||||||||||||
| Shares redeemed |
(2,793,595 | ) | (37,201,742 | ) | (5,738,860 | ) | (81,695,623 | ) | (5,140,817 | ) | (75,765,159 | ) | ||||||||||||
| Net increase (decrease) |
(8,508 | ) | $ | 457,313 | 6,984,398 | $ | 95,084,145 | 882,046 | $ | 13,786,565 | ||||||||||||||
| Service |
||||||||||||||||||||||||
| Shares sold |
34,906 | $ | 465,256 | 131,668 | $ | 1,830,439 | 18,095 | $ | 269,652 | |||||||||||||||
| Shares issued in reinvestment of distributions |
1,481 | 19,846 | 6,087 | 82,536 | 440 | 6,344 | ||||||||||||||||||
| Shares redeemed |
(31,204 | ) | (416,251 | ) | (135,471 | ) | (1,847,485 | ) | (23,333 | ) | (346,421 | ) | ||||||||||||
| Net increase (decrease) |
5,183 | $ | 68,851 | 2,284 | $ | 65,490 | (4,798 | ) | $ | (70,425 | ) | |||||||||||||
| Investor A |
||||||||||||||||||||||||
| Shares sold and automatic conversion of shares |
483,810 | $ | 6,472,186 | 2,006,465 | $ | 29,118,373 | 709,861 | $ | 10,660,951 | |||||||||||||||
| Shares issued from conversion |
— | — | — | — | 6,266 | 89,795 | ||||||||||||||||||
| Shares issued in reinvestment of distributions |
468,271 | 6,246,735 | 1,562,094 | 21,150,762 | 129,036 | 1,860,696 | ||||||||||||||||||
| Shares redeemed |
(1,616,959 | ) | (21,821,154 | ) | (2,933,904 | ) | (40,843,389 | ) | (2,741,294 | ) | (40,278,089 | ) | ||||||||||||
| Net increase (decrease) |
(664,878 | ) | $ | (9,102,233 | ) | 634,655 | $ | 9,425,746 | (1,896,131 | ) | $ | (27,666,647 | ) | |||||||||||
| Investor B (a) |
||||||||||||||||||||||||
| Shares sold |
— | $ | — | — | $ | — | 4 | $ | 85 | |||||||||||||||
| Shares issued in reinvestment of distributions |
— | — | — | — | 35 | 501 | ||||||||||||||||||
| Shares converted |
— | — | — | — | (6,323 | ) | (89,795 | ) | ||||||||||||||||
| Shares redeemed |
— | — | — | — | (273 | ) | (4,268 | ) | ||||||||||||||||
| Net decrease |
— | $ | — | — | $ | — | (6,557 | ) | $ | (93,477 | ) | |||||||||||||
| Investor C |
||||||||||||||||||||||||
| Shares sold |
62,357 | $ | 821,554 | 411,456 | $ | 5,601,290 | 123,519 | $ | 1,770,365 | |||||||||||||||
| Shares issued in reinvestment of distributions |
27,333 | 355,882 | 121,717 | 1,607,882 | 15,240 | 213,665 | ||||||||||||||||||
| Shares redeemed and automatic conversion of shares |
(392,226 | ) | (5,115,380 | ) | (1,321,269 | ) | (18,654,269 | ) | (635,379 | ) | (9,044,183 | ) | ||||||||||||
| Net decrease |
(302,536 | ) | $ | (3,937,944 | ) | (788,096 | ) | $ | (11,445,097 | ) | (496,620 | ) | $ | (7,060,153 | ) | |||||||||
| Class K |
||||||||||||||||||||||||
| Shares sold |
2,075,133 | $ | 28,379,008 | 13,208,060 | $ | 182,904,459 | 3,577,635 | $ | 51,399,050 | |||||||||||||||
| Shares issued in reinvestment of distributions |
973,739 | 13,048,106 | 1,316,988 | 17,911,034 | 118,907 | 1,721,775 | ||||||||||||||||||
| Shares redeemed |
(3,116,270 | ) | (41,172,793 | ) | (526,840 | ) | (7,590,312 | ) | (631,695 | ) | (9,438,476 | ) | ||||||||||||
| Net increase (decrease) |
(67,398 | ) | $ | 254,321 | 13,998,208 | $ | 193,225,181 | 3,064,847 | $ | 43,682,349 | ||||||||||||||
| Total Net Increase (Decrease) |
(1,038,137 | ) | $ | (12,259,692 | ) | 20,831,449 | $ | 286,355,465 | 1,542,787 | $ | 22,578,212 | |||||||||||||
| (a) | On December 27, 2017, all the issued and outstanding Investor B Shares of the Fund were converted to Investor A Shares of the Fund. |
| 12. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.
| 50 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Report of Independent Registered Public Accounting Firm
To the Shareholders of BlackRock Tactical Opportunities Fund and the Board of Trustees of BlackRock FundSM:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of BlackRock Tactical Opportunities Fund of BlackRock FundSM (the “Fund”), including the schedule of investments, as of April 30, 2020, the related statements of operations for the period from October 1, 2019 through April 30, 2020 and for the year ended September 30, 2019, the statements of changes in net assets for the period from October 1, 2019 through April 30, 2020 and for each of the two years in the period ended September 30, 2019, the financial highlights for the period from October 1, 2019 through April 30, 2020 and for each of the five years in the period ended September 30, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of April 30, 2020, and the results of its operations for the period from October 1, 2019 through April 30, 2020 and for the year ended September 30, 2019, the changes in its net assets for the period from October 1, 2019 through April 30, 2020 and for each of the two years in the period ended September 30, 2019, and the financial highlights for the period from October 1, 2019 through April 30, 2020 and each of the five years in the period ended September 30, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of April 30, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Boston, Massachusetts
June 22, 2020
We have served as the auditor of one or more BlackRock investment companies since 1992.
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 51 |
| Important Tax Information (unaudited) |
For corporate shareholders, the percentage of ordinary income distributions paid during the fiscal period ended April 30, 2020 that qualified for the dividends-received deduction were as follows:
|
|
||||
| Fund | Dividends-Received Deduction |
|||
|
|
||||
| BlackRock Tactical Opportunities Fund |
12.92% | |||
|
|
||||
The following maximum amounts are hereby designated as qualified dividend income for individuals for the fiscal period ended April 30, 2020:
|
|
||||
| Fund | Qualified Dividend Income | |||
|
|
||||
| BlackRock Tactical Opportunities Fund |
$ 11,032,764 | |||
|
|
||||
For the fiscal period ended April 30, 2020, the Fund hereby designates the following maximum amounts allowable as interest-related dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations:
|
|
||||
| Fund | Interest-Related Dividends | |||
|
|
||||
| BlackRock Tactical Opportunities Fund |
$ 2,842,394 | |||
|
|
||||
The Fund hereby designates the following amount of distributions from direct federal obligation interest for the fiscal period ended April 30, 2020:
|
|
||||
| Fund | Federal Obligation Interest | |||
|
|
||||
| BlackRock Tactical Opportunities Fund |
$ 1,386,970 | |||
|
|
||||
The law varies in each state as to whether and what percent of ordinary income dividends attribute to federal obligations is exempt from state income tax. Shareholders are advised to check with their tax advisers to determine if any portion of the dividends received is exempt from state income tax.
| 52 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Trustee and Officer Information
| Independent Trustees (a) | ||||||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) (c) |
Principal Occupation(s) During Past Five Years | Number of
BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Mark Stalnecker 1951 |
Chair of the Board (Since 2019) and Trustee (Since 2015) |
Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee and Chair of the Finance and Investment Committees, Winterthur Museum and Country Estate from 2005 to 2016; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System from 2009 to 2017; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director and Chair of the Audit Committee, SEI Private Trust Co. from 2001 to 2014. | 36 RICs consisting of 150 Portfolios | None | ||||
| Bruce R. Bond 1946 |
Trustee (Since 2019) |
Board Member, Amsphere Limited (software) since 2018; Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007. | 36 RICs consisting of 150 Portfolios | None | ||||
| Susan J. Carter 1956 |
Trustee (Since 2016) |
Director, Pacific Pension Institute from 2014 to 2018; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. ("CCI") (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest from 2015 to 2018 and Board Member thereof since 2018; Advisory Board Member, Bridges Fund Management since 2016; Trustee, Financial Accounting Foundation since 2017; Practitioner Advisory Board Member, Private Capital Research Institute ("PCRI") since 2017; Lecturer in the Practice of Management, Yale School of Management since 2019. | 36 RICs consisting of 150 Portfolios | None | ||||
| Collette Chilton 1958 |
Trustee (Since 2015) |
Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006. | 36 RICs consisting of 150 Portfolios | None | ||||
| Neil A. Cotty 1954 |
Trustee (Since 2016) |
Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002. | 36 RICs consisting of 150 Portfolios | None | ||||
| Lena G. Goldberg 1949 |
Trustee (Since 2019) |
Senior Lecturer, Harvard Business School, since 2008; Director, Charles Stark Draper Laboratory, Inc. since 2013; FMR LLC/Fidelity Investments (financial services) from 1996 to 2008, serving in various senior roles including Executive Vice President 4 Strategic Corporate Initiatives and Executive Vice President and General Counsel; Partner, Sullivan & Worcester LLP from 1985 to 1996 and Associate thereof from 1979 to 1985. | 36 RICs consisting of 150 Portfolios | None | ||||
| Henry R. Keizer 1956 |
Trustee (Since 2019) |
Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) from 2004 to 2005 and 2010 to 2012; Director, KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010. | 36 RICs consisting of 150 Portfolios | Hertz Global Holdings (car rental); Montpelier Re Holdings, Ltd. (publicly held property and casualty reinsurance) from 2013 until 2015; Sealed Air Corp. (packaging); WABCO (commercial vehicle safety systems) | ||||
| Cynthia A. Montgomery 1952 |
Trustee (Since 2007) |
Professor, Harvard Business School since 1989. | 36 RICs consisting of 150 Portfolios | Newell Rubbermaid, Inc. (manufacturing) | ||||
| TRUSTEE AND OFFICER INFORMATION | 53 |
Trustee and Officer Information (continued)
| Independent Trustees (a) (continued) | ||||||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) (c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Donald C. Opatrny 1952 |
Trustee (Since 2019) |
Trustee, Vice Chair, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014; Member of the Board and Investment Committee, University School from 2007 to 2018; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; Trustee, Artstor (a Mellon Foundation affiliate) from 2010 to 2015; President and Trustee, the Center for the Arts, Jackson Hole from 2011 to 2018; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Member of Affordable Housing Supply Board of Jackson, Wyoming since 2018; Member, Investment Funds Committee, State of Wyoming since 2017; Trustee, Phoenix Art Museum since 2018; Trustee, Arizona Community Foundation and Member of Investment Committee since 2020. | 36 RICs consisting of 150 Portfolios | None | ||||
| Joseph P. Platt 1947 |
Trustee (Since 2007) |
General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015. | 36 RICs consisting of 150 Portfolios | Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc. | ||||
| Kenneth L. Urish 1951 |
Trustee (Since 2007) |
Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past-Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter-Tel from 2006 to 2007. | 36 RICs consisting of 150 Portfolios | None | ||||
| Claire A. Walton 1957 |
Trustee (Since 2016) |
Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group from 2009 to 2018; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015. | 36 RICs consisting of 150 Portfolios | None | ||||
| 54 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Trustee and Officer Information (continued)
| Interested Trustees (a)(d) | ||||||||
| Name Year of Birth (b) |
Position(s) Held (Length of Service) (c) |
Principal Occupation(s) During Past Five Years | Number of
BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Robert Fairbairn 1965 |
Trustee (Since 2018) |
Vice Chairman of BlackRock, Inc. since 2019; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s Human Capital Committee; Senior Managing Director of BlackRock, Inc. from 2010 to 2019; oversaw BlackRock’s Strategic Partner Program and Strategic Product Management Group from 2012 to 2019; Member of the Board of Managers of BlackRock Investments, LLC from 2011 to 2018; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016. | 123 RICs consisting of 261 Portfolios | None | ||||
| John M. Perlowski (e) 1964 |
Trustee (Since 2015); President and Chief Executive Officer (Since 2010) |
Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009. | 124 RICs consisting of 262 Portfolios | None | ||||
| (a) The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. | ||||||||
| (b) Independent Trustees serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board may determine to extend the terms of Independent Trustees on a case-by-case basis, as appropriate. | ||||||||
| (c) Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. Furthermore, effective January 1, 2019, three BlackRock Fund Complexes were realigned and consolidated into two BlackRock Fund Complexes. As a result, although the chart shows the year that each Independent Trustee joined the Board, certain Independent Trustees first became members of the boards of other BlackRock-advised Funds, legacy MLIM funds or legacy BlackRock funds as follows: Bruce R. Bond, 2005; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Kenneth L. Urish, 1999; Lena G. Goldberg, 2016; Henry R. Keizer, 2016; Donald C. Opatrny, 2015. | ||||||||
| (d) Mr. Fairbairn and Mr. Perlowski are both "interested persons," as defined in the 1940 Act, of the Trust based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Fixed-Income Complex. | ||||||||
| (e) Mr. Perlowski is also a trustee of the BlackRock Credit strategies Fund. | ||||||||
| TRUSTEE AND OFFICER INFORMATION | 55 |
Trustee and Officer Information (continued)
| Officers Who Are Not Trustees (a) | ||||
| Name Year of Birth(b) |
Position(s) Held (Length of Service) |
Principal Occupation(s) During Past Five Years | ||
| Thomas Callahan 1968 |
Vice President (Since 2016) |
Managing Director of BlackRock, Inc. since 2013; Member of the Board of Managers of BlackRock Investments, LLC (principal underwriter) since 2019 and Managing Director thereof since 2017; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013. | ||
| Jennifer McGovern 1977 |
Vice President (Since 2014) |
Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Product Development and Oversight for BlackRock’s strategic Product Management Group since 2019; Head of Product structure and Oversight for BlackRock’s U.S. Wealth Advisory Group from 2013 to 2019. | ||
| Neal J. Andrews 1966 |
Chief Financial Officer (Since 2007) |
Chief Financial Officer of the iShares® exchange traded funds from 2019 to 2020; Managing Director of BlackRock, Inc. since 2006. | ||
| Jay M. Fife 1970 |
Treasurer (Since 2007) |
Managing Director of BlackRock, Inc. since 2007. | ||
| Charles Park 1967 |
Chief Compliance Officer (Since 2014) |
Anti-Money Laundering Compliance Officer for certain BlackRock-advised Funds from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the BlackRock Multi-Asset Complex and the BlackRock Fixed-Income Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012. | ||
| Lisa Belle 1968 |
Anti-Money Laundering Compliance Officer (Since 2019) |
Managing Director of BlackRock, Inc. since 2019; Global Financial Crime Head for Asset and Wealth Management of JP Morgan from 2013 to 2019; Managing Director of RBS securities from 2012 to 2013; Head of Financial Crimes for Barclays Wealth Americas from 2010 to 2012. | ||
| Janey Ahn 1975 |
Secretary (Since 2019) |
Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017. | ||
| (a) | The address of each Officer is c/o BlackRock, Inc., 55 East 52nd street, New York, New York 10055. |
| (b) | Officers of the Trust serve at the pleasure of the Board. |
Further information about the Trust’s Trustees and Officers is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.
Effective December 31, 2019, Robert M. Hernandez retired as Trustee of the Trust.
| 56 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
General Information
Householding
The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on Form N-Q. The Fund’s Forms N-PORT and N-Q are available on the SEC’s website at sec.gov. The Fund’s Form N-Q may also be obtained upon request and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at blackrock.com; and (3) on the SEC’s website at sec.gov.
Availability of Proxy Voting Record
Information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at blackrock.com; or by calling (800) 441-7762 and (2) on the SEC’s website at sec.gov.
BlackRock’s Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed-income and tax-exempt investing. Visit blackrock.com for more information.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also visit blackrock.com for more information.
Automatic Investment Plans
Investor class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
| ADDITIONAL INFORMATION | 57 |
Additional Information (continued)
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
| 58 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Glossary of Terms Used in This Report
Currency
| AUD | Australian Dollar | |
| BRL | Brazilian Real | |
| CAD | Canadian Dollar | |
| CHF | Swiss Franc | |
| CNY | Chinese Yuan | |
| EUR | Euro | |
| GBP | British Pound | |
| INR | Indian Rupee | |
| JPY | Japanese Yen | |
| KRW | South Korean Won | |
| MXN | Mexican Peso | |
| MYR | Malaysian Ringgit | |
| NOK | Norwegian Krone | |
| NZD | New Zealand Dollar | |
| PLN | Polish Zloty | |
| SEK | Swedish Krona | |
| SGD | Singapore Dollar | |
| THB | Thai Baht | |
| TWD | Taiwan New Dollar | |
| USD | United States Dollar | |
| ZAR | South African Rand | |
| Portfolio Abbreviations | ||
| ADR | American Depositary Receipts | |
| BA | Canadian Bankers Acceptances | |
| BBR | Australian Bank Bill Rate | |
| BZDIOVER | Overnight Brazil CETIP — Interbank Rate | |
| CD_KSDA | Certificates of Deposit by the Korean Securities Dealers Association | |
| CDO | Collateralized Debt Obligation | |
| CNREPOFI | Day China Fixing Repo Rates | |
| EURIBOR | Euro Interbank Offered Rate | |
| JIBAR | Johannesburg Interbank Average Rate | |
| LIBOR | London Interbank Offered Rate | |
| MIBOR | Mumbai Interbank Offered Rate | |
| MSCI | Morgan Stanley Capital International | |
| MXIBTIIE | Mexico Interbank TIIE 28-Day | |
| OTC | Over-the-counter | |
| REIT | Real Estate Investment Trust | |
| S&P | Standard & Poor’s | |
| SDR | Swedish Depositary Receipts | |
| SOR | Singapore Interbank Offered Rate | |
| STIBOR | Stockholm Interbank Offered Rate | |
| THBFIX | Thai Baht Interest Rate Fixing | |
| TWCPBA | Taiwan Secondary Markets Bills Rate | |
| WIBOR | Warsaw Interbank Offered Rate | |
| GLOSSARY OF TERMS USED IN THIS REPORT | 59 |
Want to know more?
blackrock.com | 800-441-7762
This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
TO-4/20-AR
|
|
|
| Item 3 – | Audit Committee Financial Expert – The registrant’s board of directors (the “board of directors”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent: |
Neil A. Cotty
Henry R. Keizer
Kenneth L. Urish
Claire A. Walton
Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.
| Item 4 – | Principal Accountant Fees and Services |
The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:
| (a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees | |||||||||||||
| Entity Name | Current Fiscal Year End3 |
Previous Fiscal Year End |
Current Fiscal Year End3 |
Previous Fiscal Year End |
Current Fiscal Year End3 |
Previous Fiscal Year End |
Current Fiscal Year End3 |
Previous Fiscal Year End | ||||||||
| BlackRock Tactical Opportunities Fund | $63,240 | $63,240 | $0 | $0 | $20,000 | $17,300 | $0 | $0 | ||||||||
The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (the “Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):
| Current Fiscal Year End3 | Previous Fiscal Year End | |||
| (b) Audit-Related Fees1 |
$0 | $0 | ||
| (c) Tax Fees2 |
$0 | $0 | ||
| (d) All Other Fees4 |
$1,984,000 | $2,050,500 |
2
1 The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators.
2 The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations.
3The registrant changed its fiscal year end from September 30 to April 30 effective April 30, 2020 whereby this fiscal year consists of the seven months ended April 30, 2020.
4 Non-audit fees of $1,984,000 and $2,050,500 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Affiliated Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.
Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:
| Entity Name |
Current Fiscal Year End1 |
Previous Fiscal Year End | ||||
| BlackRock Tactical Opportunities Fund | $20,000 | $17,300 |
1The registrant changed its fiscal year end from September 30 to April 30 effective April 30, 2020 whereby this
fiscal year consists of the seven months ended April 30, 2020.
3
Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored and advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:
| Current Fiscal Year End1 |
Previous Fiscal Year End | |
|
$1,984,000 |
$2,050,500 |
1The registrant changed its fiscal year end from September 30 to April 30 effective
April 30, 2020 whereby this fiscal year consists of the seven months ended April 30, 2020.
These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Affiliated Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
| Item 5 – | Audit Committee of Listed Registrant – Not Applicable |
| Item 6 – | Investments |
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
| Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable |
| Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not Applicable |
| Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable |
| Item 10 – | Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures. |
| Item 11 – | Controls and Procedures |
(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.
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(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 12 – | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies – Not Applicable |
| Item 13 – | Exhibits attached hereto |
(a)(1) Code of Ethics – See Item 2
(a)(2) Section 302 Certifications are attached
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) Section 906 Certifications are attached
5
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BlackRock Funds | ||
| By: | /s/ John M. Perlowski | |
| John M. Perlowski | ||
| Chief Executive Officer (principal executive officer) of | ||
| BlackRock Funds | ||
Date: July 2, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ John M. Perlowski | |
| John M. Perlowski | ||
| Chief Executive Officer (principal executive officer) of | ||
| BlackRock Funds |
Date: July 2, 2020
| By: | /s/ Neal J. Andrews | |
| Neal J. Andrews | ||
| Chief Financial Officer (principal financial officer) of | ||
| BlackRock Funds |
Date: July 2, 2020
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